Your Firm Is Considering a Project with a Five-Year Life

question 29

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. At what level of sales should the firm be willing to abandon this project?

• A) 420 units
• B) 1,041 units
• C) 1,479 units
• D) 1,618 units
• E) 2,500 units

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Definitions:

12-Lead ECG Machine

A diagnostic tool that measures and records the electrical activity of the heart from twelve different perspectives, widely used to detect and assess cardiac abnormalities.

Hair Clippers

Electric or manual tools used to cut or trim human hair to the desired length.

Betadine Cleanser

A brand of antiseptic solution used for cleaning skin, wounds, and surgical sites to kill germs and reduce the risk of infection.

Chest Discomfort

A feeling of tightness, heaviness, or pain in the chest area, often associated with heart disease but can have other causes.