Question: 9. Chrustuba Inc. is evaluating a new project that would cost $8.0 million at 1-0. There is a 50% chance that the project would be
9. Chrustuba Inc. is evaluating a new project that would cost $8.0 million at 1-0. There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of S5,4 million during Years 1, 2, and 3. However, there is a 50% chance that it would be less successful and would generate only $1 million for each of the 3 years. If the project is highly successful, it would open the door for another investment of S10 million at the end of Year 2, and this new investment could be sold for $20 million at the end of Year 3. Assuming a WACC of 8.5%, what is the project's expected NPV (in thousands) after taking into account this growth option? Do not round intermediate calculations. a. S3,942 b. $4,318 c. $4.506 d. $3.755 e. $3,379
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