Question
Your firm is considering a project with a five-year life and an initial cost of $120,000. The discount rate for the project is 12 percent.
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Your firm is considering a project with a five-year life and an initial cost of $120,000. The discount rate for the project is 12 percent. The firm expects to sell 2,100 units a year. The cash flow per unit is $20. The firm will have the option to abandon this project after three years at which time it expects it could sell the project for $45,000. At what level of sales should the firm be willing to abandon this project?
a. 420 units
b. 1,618 units
c. 1,332 units
d. 2,500 units
e. 1,479 units
Your firm is considering a project with a five-year life and an initial cost of $120,000. The discount rate for the project is 12 percent. The firm expects to sell 2,100 units a year. The cash flow per unit is $20. The firm will have the option to abandon this project after three years at which time it expects it could sell the project for $45,000. At what level of sales should the firm be willing to abandon this project?
| a. | 420 units | |
| b. | 1,618 units | |
| c. | 1,332 units | |
| d. | 2,500 units | |
| e. | 1,479 units |
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Dark Finance
Authors: Fabio Mattioli
1st Edition
1503611655, 978-1503611658
