Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:In l-year the number of units sold will be revised either upward by 8,700 or downward by
4,300 with equal probability.
The initial values are as follows:
Net cash flow per unit
S71
No. of units sold
5,700
$1,680,000
Initial investment
Life of project
Discount rate
Scrape value in year-1
10
15%
$1,500,000
Find the present value of option to abandon.
(A) $18,798
(B) $17,798
(C) $18,978
(D) $18,978
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