Your fiRm Is Considering a Project with a fiVe-Year Life

question 56

Multiple Choice

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%.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 €50,000.You are interested in knowing how the project will perform if the
Sales forecast for years four and five of the project are revised such that there is a 50% chance that
The sales will be either 1,400 or 2,500 units a year.What is the net present value of this project
Given your sales forecasts?

• A)€23,617
• B)€23,719
• C)€25,002
• D)€26,877
• E)€28,746

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Definitions:

Diverse Groups

Comprise individuals from a variety of backgrounds, cultures, ethnicities, and perspectives, contributing to a rich, multifaceted environment.

Research

The methodical examination and analysis of materials and sources with the goal of establishing facts and deriving new insights.

Diversity

The variety of differences within a population, including race, ethnicity, gender, age, and many other factors.

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product more efficiently.