Spicurity is now operating a plant that has the ability to generate a cash flow of $2.8 million per year. The government plans to change the regulation regarding this plant shortly. After the change of the regulation, the cash flow next year will either increase by 16% or decrease by 26%, with a probability of 40% and 60%, respectively. The manager expects the change will last for the future once it is made. The expense to run this plant is $2.2 million annually. The cost of capital for this plant is estimated to be 9%. Another company, Tigerprises, would like to buy this plant for $3.5 million at any time.

The value of this plant will be closest to:

$5.60 million

$6.76 million

$-5.16 million

$3.80 million