Question
If you are a financial analyst and is examining a new project. The project is expected to sell 5,900 units per year at $70 net
If you are a financial analyst and is examining a new project. The project is expected to sell 5,900 units per year at $70 net cash flow a piece for the next 20 years. In other words, the annual operating cash flow is projected to be $70 5,900 = $413,000. The relevant discount rate is 16 percent, and the initial investment required is $1,700,000.After the first year, the project can be dismantled and sold for $1,530,000.If expected sales are revised based on the first years performance, below what level of expected sales would it make sense to abandon the project?
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