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

question 24

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 $70,000.At what level of sales should she be willing to abandon the project?

• A)899 units
• B)923 units
• C)967 units
• D)1,077 units
• E)1,206 units

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Definitions:

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