Question: ENG Inc. is considering a project which would require a $ 1 . 8 5 million after - tax investment today ( t = 0

ENG Inc. is considering a project which would require a $1.85 million after-tax investment today (t =0). The after-tax cash flows the factory generates will depend on whether the state imposes a new property tax. There is a 45% probability that the tax will pass. If the tax passes, the factory will produce after-tax cash flows of $40,000 at the end of each of the next 5 years. There is a 55% probability that the tax will not pass. If the tax does not pass, the factory will produce after-tax cash flows of $800,000 for the next 5 years. The project has a WACC of 10%. If the factory is unsuccessful, the firm will have the option to abandon the project 1 year from now if the tax passes. If the factory project is abandoned, the firm will receive the expected $40,000 cash flow at t =1, and the property will be sold netting $900,000(after taxes are considered) at t =1. Once the project is abandoned, the company would no longer receive any cash inflows from it. What is the projects expected NPV if it can be abandoned?
a.- $113,819.66
b.+$ 67,497.21
c.+$134,994.42
d.+$202,491.63
e.+$269,988.84

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