Margerit Is Reviewing a Project with Projected Sales of 1,500

question 110

Multiple Choice

Margerit is reviewing a project with projected sales of 1,500 units a year, a cash flow of $40 a unit and a three-year project life. The initial cost of the project is $95,000. The relevant discount rate is
15 percent. Margerit has the option to abandon the project after one year at which time she feels
She could sell the project for $60,000. At what level of sales should she be willing to abandon the
Project?

• A) 899 units
• B) 923 units
• C) 967 units
• D) 1,199 units
• E) 1,206 units