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

question 68

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.You are interested in knowing how the project will perform if the sales forecast for years four and five of the project are revised such that there is a 50% chance that the sales will be either 1,400 or 2,500 units a year.What is the net present value of this project given your sales forecasts?

• A)€23,617
• B)€23,719
• C)€25,002
• D)€26,877
• E)€28,746

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Definitions:

Organisational Culture

The set of shared attitudes, values, goals, and practices that characterizes an institution or organization.

Governmental Laws

Statutes and regulations enacted by legislative bodies that govern the actions and behavior of citizens and organizations.

Local Economic Conditions

The state of the economy in a specific geographic area, including factors like employment rates, industrial output, and consumer spending.

Change Leadership

The ability to influence and inspire action in others towards achieving organizational transformations and adapting to new challenges.