If you are a financial analyst and is examining a new project. The project is expected to sell 5,900 units per year at $73 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $73 × 5,900 = $430,700. 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 year’s performance, below what level of expected sales would it make sense to abandon the project?
This question was answered on: May 23, 2022
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