Question
Allied Inc. is considering a new product launch. We expect to sell 7,000 units per year at $38 net cash flowa piece for the next
Allied Inc. is considering a new product launch. We expect to sell 7,000 units per year at $38 net cash flowa piece for the next 10 years. In other words, the annual operating cash flow is projected to be 38*7,000=$266,000. The relevant discount rate is 16%. and the initial investment is $1,040,000. After the first year, the project is equally likely to be revised upward to 9,500 units or downward to 3,800 units. The project can be dismantled and sold for $820,000. Considering the possibility ofabandonment, what is the NPV of the project?
$245,638.51 |
$259,552.73 |
$665,184.94 |
$1,507,481.17 |
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