We are examining a new project. We expect to sell 8,750 units per year at $189 net
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Question:
We are examining a new project. We expect to sell 8,750 units per year at $189 net cash flow apiece (including CCA) for the next 16 years. In other words, the annual operating cash flow is projected to be $189 8,750 = $1,653,750. The relevant discount rate is 14 percent, and the initial investment required is $5,500,000.
After the first year, the project can be dismantled and sold for $2,800,000. If expected sales are revised based on the first years performance, at what level of expected sales would it make sense to abandon the project? (Do not round intermediate calculations and round your final answer to the nearest whole unit. (e.g., 32))
A.2,375 |
B.2,412 |
C.2,975 |
D.2,397 |
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