Western Industrial Products Is Considering a Project with a Four-Year

question 95

Multiple Choice

Western Industrial Products is considering a project with a four-year life and an initial cost of $212,000.The discount rate for the project is 16 percent.The firm expects to sell 9,600 units on the last day of each year.The cash flow per unit is $50.The firm will have the option to abandon this project at the end of year one (after year one's sales) at which time the project's assets could be sold for an estimated $125,000.The firm should abandon the project at the end of year one if the expected level of annual sales,starting with year 2,falls to _____ units or less.Ignore taxes.

• A)1,113 units
• B)1,267 units
• C)1,922 units
• D)2,034 units
• E)2,108 units

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