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Q4. Titan Lid. is considering an investment of $ 5 Million in a project. The output of the project can sell maximum for 2 years. Cash inflow of the project are uncertain as exhibited in the table given below. Ignoring tax and assuming cost of capital to be 10%, find the NPV. Will your answer change if the company has the option of abandoning the project at the end of 1 year? If this option exercised, the assets of the project will be sold, at the end of 15t year, for $ 2 million. Year 1 Year 2 Net cash inflow Market demand Net cash inflow Market demand $ 0.5 Million Low $ 2 Million Good $ 2 Million High $ 3 Million Low $ 1 Million Good $ 2.5 Million High $ 2 Million High $ 3.5 Million Low $ 2 Million Good $ 3.5 Million Low $ 4 Million High $ 5.5 Million Low Note: Probability will depend upon market demand. The range of probability is given below. Kindly use it according to your assumption. Market demand High Good Low Probability More than 0.40 0.40 to 0.24 Below 0.25
 
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