Question
Western Industrial Products is considering a project with a four-year life and an initial cost of $268,000. The discount rate for the project is 14.5
Western Industrial Products is considering a project with a four-year life and an initial cost of $268,000. The discount rate for the project is 14.5 percent. The firm expects to sell 2,200 units on the last day of each year. The cash flow per unit is $50. The firm will have the option to abandon this project after one year at which time the project's assets could be sold for an estimated $225,000. The firm should abandon the project immediately following the sale on the last day of the first year if the expected level of annual sales, starting with year 2, falls to _____ units or less. Ignore taxes.
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