Dressler Technologies Is Considering a Project with a 3-Year Life

question 59

Multiple Choice

Dressler Technologies is considering a project with a 3-year life and an initial cost of $85,000. The discount rate for the project is 14.5 percent. The firm expects to sell 1,200 units on the last day of each year. The cash flow per unit is $32. The firm will have the option to abandon this project at the end two years (after year 2 sales) at which time the project's assets could be sold for an estimated $30,000. The firm's managers are interested in knowing how the project will perform if the sales forecast for year 3 of the project is revised such that there is a 50/50 chance that the sales will be either 1,000 or 1,400 units a year. What is the net present value of this project at time zero given the current sales forecasts?

• A)-$3,474
• B)-$2,526
• C)$4,191
• D)$6,192
• E)$6,887

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Definitions:

Aspirated

Referring to the inhalation of foreign materials into the respiratory tract, such as food, liquid, or stomach contents, which can lead to respiratory distress or infection.

Vigorously Coughing

A forceful and rapid expulsion of air from the lungs, often indicating respiratory distress or illness.

Food Safety

Practices and measures that are undertaken to ensure that food is safe to eat and free from contaminants.

Deli Meat

Deli meat refers to precooked or cured meat, often sliced and served cold or hot, commonly used in sandwiches and available in various types such as turkey, ham, and beef.