Question: Albert Co. is considering a four-year project that will require an initial investment of $5,000. The base-case cash flows for this project are projected to

Albert Co. is considering a four-year project that will require an initial investment of $5,000. The base-case cash flows for this project are projected to be $12,000 per year. The best-case cash flows are projected to be $19,000 per year, and the worst-case cash flows are projected to be -$3,000 per year. The company's analysts have estimated that there is a 50% probability that the project will generate the base-case cash flows. The analysts also think that there is a 25% probability cf the project generating the best-case cash flows and a 25% probability of the project generating the worst-case cash flans. what would be the expected net present value (NPV) cf this project if the project's cost cf capital is 13%? $24,715 $29,691 $25,982 $23,508 Albert now wants to take into account its ability to abandon the project at the end cf year 2 if the project ends up generating the worst-case scenario cash flans. If it decides to abandon the project at the end cf year 2, the company will receive a one-time n t cash inflow of $3,000 (at the end cf year 2). The $3,000 the company receives at the end cf year 2 is the difference between the cash the company receives from selling off the project's assets and the company's -$3,000 cash outflow from operations. Additionally, if it abandons the project, the company will have no cash flans in years 3 and 1 of the project. Using the information in the preceding problem, find the expected NPV of this project when taking the abandonment option into account. $25,555 $21,210 $32,280 $26,900 What is the value of the option to abandon the project
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