We are examining a new project. We expect to sell 6,200 units per year at $76 net cash low apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $76 x 6,200 = $471,200. The relevant discount rate is 18 percent and th nitial investment required is $1,730,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. After the first year, the project can be dismantled and sold for $1,600,000. 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? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. NPV b. Level of expected sales units

We are examining a new project. We expect to sell 6,200 units per year at $76 net cash low apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $76 x 6,200 = $471,200. The relevant discount rate is 18 percent and th nitial investment required is $1,730,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. After the first year, the project can be dismantled and sold for $1,600,000. 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? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. NPV b. Level of expected sales units

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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