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Revisit MC 1 Question 3 A given project (name PRO) requires $1.500 as initial investment. The project's future cash flows are critically dependent on whether a competitor's product is approved by the regulator of the regulator rejects the competitive product, project PRO will have high sales and cash flows, but if the competitive product is approved that will negatively impact. There is a 75% chance that the competitive product will be rejected, and in that case PRO'S expected cash flows will be $500 at the end of each of the next seven years (t = 1 to 7). There is a 25% chance that the competitor's product will be approved, in which case the expected cash flows will be only $25 at the end of each of the next seven years (t = 1 to 7). The company will know for sure one year from today whether the competitor's product has been approved or not. If the PRO project waits a year, the project's up-front cost at t = 1 will remain at $1,500, the subsequent cash flows will remain at $500 per year if the competitor's product is rejected and $25 per year if the alternative product is approved. However, if PRO decides to wait, the subsequent cash flows will be received only for six years (.e. fromt = 2 ... 7). Calculate the difference in NPV if the firm decides to launch the project today versus if the firm waits till the regulator's decision is announced. Revit MC 1 Question #3 F A given project (name PRO) requires $1.500 as initial investment. The project's future cash flows are critically dependent on whether a competitor's product is approved by the regulator. If the regulator rejects the competitive product, project PRO will have high sales and cash flows, but if the competitive product is approved that will negatively impact. There is a 75% chance that the competitive product will be rejected, and in that case PRO'S expected cash flows will be $500 at the end of each of the next seven years (t = 1 to 7). There is a 25% chance that the competitor's product will be approved, in which case the expected cash flows will be only $25 at the end of each of the next seven years (t = 1 to 7). The company will know for sure one year from today whether the competitor's product has been approved or not. If the PRO project waits a year, the project's up-front cost at t = 1 will remain at $1,500, the subsequent cash flows will remain at $500 per year if the competitor's product is rejected and $25 per year if the alternative product is approved. However, if PRO decides to wait, the subsequent cash flows will be received only for six years (.e. fromt = 2 ... 7). Calculate the difference in NPV if the firm decides to launch the project today versus if the firm waits till the regulator's decision is announced

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