Brewster's is considering a project with a life of 4 years, an initial cost of $126,000, and a discount rate of 15 percent. The firm expects to sell 1,950 units a year at a cash flow per unit of $26. The firm will have the option to abandon this project after 2 years at which time it could sell the project for $57,500. At what level of sales should the firm be willing to abandon this project at the end of year 2?

Level of sales to abandon = ??? units

Allowed attempts: 3

Check Answer

The firm is interested in knowing how the project will perform if the sales forecasts for Years 3 and 4 of the project are revised such that there is a 65 percent chance the unit sales will be 1,300, otherwise they expect to sell 2,350 units per year. What is the net present value of this project given these revised sales forecasts?

NPV=