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

---

Definitions:

Corporate Brand

The perception of a company that distinguishes it from its competitors, built on values, visions, and the quality of products and services it offers.

Chief Marketing Officer

A senior executive position tasked with supervising the strategy, creation, and implementation of a company's marketing and advertising efforts.

Employee Volunteer Programs

Initiatives within organizations where employees are encouraged to participate in volunteer work, often tied to the company's social responsibility efforts.

Paid Time Off

A work policy allowing employees to be paid while they are away from work for certain reasons, such as vacation, illness, or personal time.