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:

Rubrospinal

Referring to the rubrospinal tract, which is a pathway in the central nervous system that helps mediate voluntary motor control.

Vestibulospinal

Relating to the vestibulospinal tract, a pathway in the central nervous system that conveys information from the vestibular system to motor neurons controlling limb and trunk muscles for balance.

Cerebral Cortex

The outer layer of the cerebrum, involved in various high-level brain functions such as thought, memory, and emotion.

Pyramids

In anatomy, this term refers to the pyramidal tracts of the brain, which are major pathways for motor communication from the brain to the spinal cord. Alternatively, it could reference the ancient monumental structures built as tombs for Pharaohs in Egypt.