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Brewster's is considering a project with a life of 5 years, an initial cost of $128.000, and a discount rate of 16 percent. The firm expects to sell 1,900 units a year at a cash flow per unit of $28. The firm will have the option to abandon this project after 3 years at which time it could sell the project for $60,000. At what level of sales should the firm be willing to abandon this project at the end of year 3? Level of sales to abandon-units Allowed attempts: 3 Check Answer The firm is interested in knowing how the project will perform if the sales forecasts for Years 4 and 5 of the project are revised such that there is a 70 percent chance the unit sales will be 1,250, otherwise they expect to sell 2,300 units per year. What is the net present value of this project given these revised sales forecasts?

Brewster's is considering a project with a life of 5 years, an initial cost of $128.000, and a discount rate of 16 percent. The firm expects to sell 1,900 units a year at a cash flow per unit of $28. The firm will have the option to abandon this project after 3 years at which time it could sell the project for $60,000. At what level of sales should the firm be willing to abandon this project at the end of year 3? Level of sales to abandon-units Allowed attempts: 3 Check Answer The firm is interested in knowing how the project will perform if the sales forecasts for Years 4 and 5 of the project are revised such that there is a 70 percent chance the unit sales will be 1,250, otherwise they expect to sell 2,300 units per year. What is the net present value of this project given these revised sales forecasts?

Essentials Of Investments
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
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Subject :- Finance

Brewster's is considering a project with a life of 5 years, an initial cost of $128,000, and a discount rate of 16 percent. The firm expects to sell 1,900 units a year at a cash flow per unit of $28. The firm will have the option to abandon this project after 3 years at which time it could sell the project for $60,000. At what level of sales should the firm be willing to abandon this project at the end of year 3? Level of sales to abandon = units Allowed attempts: 3 Check Answer The firm is interested in knowing how the project will perform if the sales forecasts for Years 4 and 5 of the project are revised such that there is a 70 percent chance the unit sales will be 1.250, otherwise they expect to sell 2,300 units per year. What is the net present value of this project given these revised sales forecasts?
Transcribed Image Text:Brewster's is considering a project with a life of 5 years, an initial cost of $128,000, and a discount rate of 16 percent. The firm expects to sell 1,900 units a year at a cash flow per unit of $28. The firm will have the option to abandon this project after 3 years at which time it could sell the project for $60,000. At what level of sales should the firm be willing to abandon this project at the end of year 3? Level of sales to abandon = units Allowed attempts: 3 Check Answer The firm is interested in knowing how the project will perform if the sales forecasts for Years 4 and 5 of the project are revised such that there is a 70 percent chance the unit sales will be 1.250, otherwise they expect to sell 2,300 units per year. What is the net present value of this project given these revised sales forecasts?
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