Galbraith Co$.$ is considering a four$-$year project that will require an initial investment of $$15,000.$ The base$-$case cash flows for this project are

projected to be $$12,000$ per year. The best$-$case cash flows are projected to be $$20,000$ per year, and the worst$-$case cash flows are projected to be

$$1,000$ 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 of the project generating the best$-$case cash flows and a $25\%$ probability of the project generating

the worst$-$case cash flows.

What would be the expected net present value $($NPV$)$ of this project if the project's cost of capital is $12\%?$

$$15,004$

$$17,652$

$$15,887$

$$16,769$

Galbraith now wants to take into account its ability to abandon the project at the end of year $2$ if the project ends up generating the worst$-$case

scenario cash flows. If it decides to abandon the project at the end of year $2,$ the company will receive a one$-$time net cash inflow of $$4,500($at the

end of year $2).$ The $$4,500$ the company receives at the end of year $2$ is the difference between the cash the company receives from selling off the

project's assets and the company's $-$$$1,000$ cash outflow from operations. Additionally, if it abandons the project, the company will have no cash flows

in years $3$ and $4$ of the project.

Using the information in the preceding problem, find the expected NPV of this project when taking the abandonment option into account.

$$19,085$

$$20,039$

$$20,994$

$$18,131$

What is the value of the option to abandon the project?