Assume the following data for Project X: NPV of the project without abandonment: −$2 million; abandonment option value: $4 million. Calculate the adjusted present value (APV)of the project.
A)−$2 million
B)−$4 million
C)+$2 million
D)+$4 million

Question

Quizplus · Accepted Answer

The adjusted present value (APV) of the project is calculated by adding the NPV of the project without abandonment to the abandonment option value. Therefore, APV = −$2 million + $4 million = $2 million.

Assume the Following Data for Project X: NPV of the Project