Now assume that one year from now OI will know if its produc…

Now assume that one year from now OI will know if its products will have become the industry standard. Also assume that after receiving the cash flows at t = 1, the company has the option to abandon the project. If it abandons the project it will receive an additional $100,000 at t = 1, but will no longer receive any cash flows after t = 1. Assume that the abandonment option does not affect the cost of capital. What is the estimated value of the abandonment option? (Assume: Active Management)

Lottie’s Boutique needs to maintain 20% of its sales in net…

Lottie’s Boutique needs to maintain 20% of its sales in net working capital. Lottie’s is considering a 3-year project which will increase sales from their current level of $110,000 to $130,000 the first year and $145,000 a year for the following two years. What amount should be included in the project analysis for the last year of the project in regards to the net working capital?