Consider a four-year project promising the following cash flows:
Year 0 1 2 3 4
Cash Flow Shs ‘000’ (16,000) 7,000 6,000 4,000 4,000
Abandonment Value Shs. 000 - 12,000 8,000 6,000 -
The cost of capital is 10%. Determine the optimal abandonment period.
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