17. Abandonment Value We are examining a new project. We expect lo sell 6,500 units per year at $43 not cash flow apiece for the next 10 years. In other

words, the annual operating cash flow is projected to beS43 x 6,500 = $279,500. The relevant discount rate is 16 percent and the initial investment required is$980,000. a. What is the base-case NPV? h. After the first year, the project can be dismantled and sold for $810,000. If expected sales are revised based on the first year's performance, when would it make sense to abandon the investment? In other words, at what level of expected sales would it make sense to abandon the project? c. Explain how the $810,000 abandonment value can be viewed as the opportunity cost of keeping the project in one year.