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We are examining a new project. We expect to sell 5,100 units per year at $65 net cash flow apiece for the next 10 years.
We are examining a new project. We expect to sell 5,100 units per year at $65 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $65 5,100 = $331,500. The relevant discount rate is 15 percent, and the initial investment required is $1,500,000. After the first year, the project can be dismantled and sold for $1,220,000. Suppose you think it is likely that expected sales will be revised upward to 8,100 units if the first year is a success and revised downward to 3,700 units if the first year is not a success. Suppose the scale of the project can be doubled in one year in the
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