Problem 7-18 Abandonment We are examining a new project. We expect to sell 5,000 units per year at $64 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $64 x 5,000 $320,000. The relevant discount rate is 13 percent, and the initial investment is $1,610 can be dismantled and sold for $1,210,000. Suppose you think it is likely that expected sales will be revised upward to 8,000 units if the first year is a success and revised downward to 3 if the first year is not a success. ,600 units a. If success and failure are equally likely, what is the NPV of the project? Consider the possiblity of abandonment in answering. (Do not round intermediate calculations and round your answer to2 decimal places, e.g., 32.16.) NPV answer to 2 decimal places, e.g., 32.16. $ 303,422.00 b. What is the value of the option to abandon? (Do not round intermediate calculations and round your Option value12,241.88 eBook & Resources References Difficulty: 2 Intermediate Worksheet