A firm is considering a project with a 6-year life and an initial cost of $33,750. The appropriate discount rate for this project is 13%. The firm expects sales to be $11,500/year for the first 3 years. Beyond year 3, there is a 40% chance that sales will fall to $6,000/year for years 4, 5, and 6 and a 60% chance that sales will rise to $12,500/year for those three years. The project also contains an abandonment option: the firm will have the option to abandon the project after 3 years (i. e., at t=3) by selling it for $20,000 (after taxes). By the time the firm faces the decision whether to continue or abandon at t=3, it will know which state will be realized in years 4 through 6 (should the project be continued).
Required:
(a) Calculate the expected net present value of this project in the absence of the abandonment option.
(b) Calculate the value (in todayâs dollar terms) of the abandonment option.

Why is the cournot equilibrium an​ equilibrium? a. there are​ short-run barriers to exit in a cournot​ duopoly, so both firms cannot alter their output levels. b. given the other​ firm's level of​ production, both firms are maximizing profits and cannot improve their situation by unilaterally altering their level of output. c. both firms operate at zero profit under a cournot​ equilibrium, so they would face negative profits if they change output. d. both firms operate at minimum​ long-run average cost under a cournot​ equilibrium, so changes to output would reduce​ long-run profits. even if they​ can't collude, why​ don't firms set their outputs at the joint​ profit-maximizing levels​ (i.e., the levels they would have chosen had they​ colluded)? a. given that other firm produces at the collusive​ level, a firm could increase their own profits by increasing output above the collusive level. b. the midpoint of the collusion curve​ (i.e., the collusive​ outcome) lies below the reaction​ curves, so both firms have an incentive to increase output under the cournot duopoly. c. both a and b are correct d. both a and b are incorrect