Shan $Co.is$ considering a four$-$year project that will require $an$ initial investment $of$ $$5,000.$ The base$-$case cash flows for this project are projected $to$

$be$ $$15,000$ per year. The best$-$case cash flows are projected $tobe$ $$22,000$ per year, and the worst$-$case cash flows are projected $tobe-$$$1,500$ per

year. The company's analysts have estimated that there $isa50\%$ probability that the project will generate the base$-$case cash flows. The analysts also

think that there $isa25\%$ probability $of$ the project generating the best$-$case cash flows and $a25\%$ 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 $is11\%?$

$$34,169$

$$39,294$

$$30,752$

$$32,461$

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

cash flows. $Ifit$ decides $to$ abandon the project $at$ the end $of$ year $2,$ the company will recelve a one$-$time net cash inflow $of$ $$3,500$$$3,500$ the company receives $at$ the end $of$ year $2is$ the difference between the cash the company receives from selling off the project's assets

and the company's $-$$$1,500$ cash outflow from operations. Additionally, $ifit$ abandons the project, the company will have $no$ cash flows $in$ years $3$ and

$4of$ the project.

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

$$37,489$

$$44,630$

$$39,274$

$$35,704$

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