Brewster's Is Considering a Project with a Life of 5

question 33

Multiple Choice

Brewster's is considering a project with a life of 5 years,an initial cost of $120,000,and a discount rate of 12 percent.The firm expects to sell 2,100 units a year at a cash flow per unit of $20.The firm will have the option to abandon this project after three years at which time it could sell the project for $50,000.At what level of sales should the firm be willing to abandon this project at the end of the third year?

• A)420 units
• B)1,041 units
• C)1,479 units
• D)1,618 units
• E)2,500 units

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Definitions:

Resources

Assets, materials, or other forms of support available to an individual or organization for effective functioning.

Petty Annoyances

Minor irritations or frustrations that though trivial, can disproportionately affect mood and well-being.

Irritations

Mild forms of discomfort or annoyance, often triggered by specific environmental or psychological stimuli.

Frustrations

are feelings of dissatisfaction and discomfort arising from obstacles that prevent one from achieving goals or satisfying needs.