can some brieflyexplain, Suppose that a firm has project that was started last year, and it is expected to earn less than its cost of capital if left unchanged. Management comes up with these suggestions.

a. Invest in a debottlenecking project that will raise economic profit, but not up to the cost of capital.

b. Cut operating costs but not enough to earn the cost of capital.

c. Sell the unprofitable business unit for a premium over its book value.

Some numbers are given inthis table,value each alternative and compare them in terms of value creation.

Table S13.2 Data for Q13.2 Base Case (a) Bottleneck (b) Cut Costs (c) Sell for 10%Premium

WACC 10% 10% 10% 10%

I₀ $10,000 $10,000 $10,000 $10,000

DI₀ $0 400 0 0

DCF₁ $300 500 350

DCF₂ $300 500 350

DCF₃ $300 500 350

Sale Price $11,000