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

question 224

Multiple Choice

Your firm is considering a project with a four-year life and an initial cost of $87,000.The discount rate for the project is 15 percent. The firm expects to sell 1,800 units a year. The cash flow per unit is $19.
The firm will have the option to abandon this project after two years at which time they expect they
Could sell the project for $40,000. At what level of sales should the firm be willing to abandon this
Project?

• A) 1,107 units
• B) 1,295 units
• C) 1,361 units
• D) 1,540 units
• E) 1,565 units

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Definitions:

Synchrony

The simultaneous action, development, or occurrence of events or processes.

Unilateral Imitation

The process of copying the actions or behaviors of another individual without reciprocal behavior from the other side.

Longitudinal Study

A research method that involves repeated observations of the same variables over a period of time, which can extend over years or decades.

Temperament

Temperament refers to the inherent aspects of an individual's personality, such as introversion or extroversion, which are evident from a very early age and are somewhat influenced by genetics.