Abandonment Value Problem Required Return is IN 000's 10% NORMAL YEAR 0 CASH FLOW (8,800) ABANDONENT FLOW PROJECT NPV BY YEAR 8,800 1 6,000 + 3,100 = 9,100 NPV (10,-8800, 9, 1003, {1} N/A -527 2 2,875 + 3,900 = 4,775 3 1,000 + 0 = 1,000 If the project should be accepted, for how many years should the firm invest? A 1 B2 C3 D do not accept project
Abandonment Value Problem Required Return is IN 000's 10% NORMAL YEAR 0 CASH FLOW (8,800) ABANDONENT FLOW PROJECT NPV BY YEAR 8,800 1 6,000 + 3,100 = 9,100 NPV (10,-8800, 9, 1003, {1} N/A -527 2 2,875 + 3,900 = 4,775 3 1,000 + 0 = 1,000 If the project should be accepted, for how many years should the firm invest? A 1 B2 C3 D do not accept project
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Abandonment Value Problem
Required Return is
IN 000's
10%
NORMAL
YEAR
0
CASH FLOW
(8,800)
ABANDONENT
FLOW
PROJECT
NPV BY YEAR
8,800
1
6,000
+
3,100 =
9,100
NPV (10,-8800, 9, 1003, {1}
N/A
-527
2
2,875
+
3,900 = 4,775
3
1,000
+
0 = 1,000
If the project should be accepted, for how many years should the firm invest?
A 1
B2
C3
D do not accept project
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