Hi L. -
Learning the hard way this time is not a wise choice. There are TWO CHILDREN whose lives may be utterly destroyed if you don't offer support and guidance at this point -- your grandchild's and your daughter's. This is not, in my opinion, the time to turn your back on either of them.
While it's true that your daughter may not have made great choices, she is 16. Teenagers frequently do not make good choices, which is why we are legally responsible for them until they are 18 -- and, most kids don't make consistently good choices for themselves until they are 25 or older. We don't get to decide to stop parenting our children just because they have made a mistake -- no matter how bad that mistake is.
Your daughter is at risk for all sorts of problems right now -- will she finish high school? Every school district has programs for teenagers such as your daughter. You need to convince her to go back to school and at least get her GED.
Once she completes that, she needs help to either find a job, or continue her education. There are public support programs that can help her with tuition and child care while she gets a Certificate, AA, or BA -- which she will need so that she can adequately support herself and her child.
Finally, you need to do whatever you can to make sure she does not have another 'oops' baby -- please take her to Planned Parenthood so that she can receive birth control counseling -- the chances of her having a second child out of wedlock are very, very high. And as you well know, children are costly and time-consuming, and when at all possible, born when mom is ready and able to take care of them.
Best of luck, and hugs to you during this tough time!
J.