Your manager asks you to evaluate a project that will generate its first cash flow of $$12,000$ in one year. The subsequent cash flows are expected to grow at $2\%$ annually for the foreseeable future. Considering its degree of risk, you think a discount rate of $5\%$ is appropriate. The project needs an initial investment of $$420,000.$ What would be your suggestion for this project?

Question $18$ options:

Take the project since it is under$-$valued by $$400,000.$

Walk away since the project is over$-$valued by $$20,000.$

The project is priced correctly.

Take the project since it is under$-$valued by $$20,000.$

Walk away since the project is over$-$valued by $$400,000.$