i chooce the A PLAN

$1/.$ ABC is considering two mutually exclusive investment projects

which have a shelf life of two years. The cash flows of the two programs $($in thousands

euros$),$ as well as the corresponding probabilities of their realization are presented

in the tables below:

GREEK REPUBLIC PMS BANKING, FINANCE

AND FINANCIAL TECHNOLOGY

$($FINTECH$)$

$2$

INVESTMENT A

Year $0$ Year $1$ Year $2$

Cost Probability Cash Flow Probability Cash Flow

$-400$

$40\%440$

$60\%460$

$40\%420$

$60\%380$

$70\%410$

$30\%360$

INVESTMENT B

Year $0$ Year $1$ Year $2$

Cost Probability Cash Flow Probability Cash

Flow

$-700$

$35\%480$

$40\%490$

$60\%480$

$65\%340$

$55\%380$

$45\%330$

A$/.$ Consider, based on the criterion of Expected Net Present Value,

which of the two investments would you choose, given that its weighted average cost

capital in the case of Investment A is estimated at $10\%,$ Investment B at $8\%,$

while the risk$-$free interest rate is $3\%.$

B$/.$ Let's say at the end of the first year a prospective buyer comes along

and submits an offer to buy the investment you chose to

implement in query a$/.$ According to his offer, he intends to her

buy instead of the amount of $400,000$ euros. Considering his offer,

justify whether or not it is profitable to sell the investment at the end of the first year.