Ruzzo's Is Considering a Project with a 5-Year Life and an Initial

question 20

Multiple Choice

Ruzzo's is considering a project with a 5-year life and an initial cost of $120,000.The discount rate for the project is 12 percent.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 $45,000.At what level of sales should the firm be willing to abandon this project?

• A)1,087.15 units
• B)1,331.32 units
• C)1,479.92 units
• D)1,618.87 units
• E)2,500.00 units

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Definitions:

Opportunity

A set of circumstances that makes it possible to do something or for something to happen.

Ability

The possession of the means or skill to do something effectively and efficiently.

Negotiators

Individuals or parties involved in discussions aimed at reaching an agreement or resolving a dispute through dialogue and compromise.

Concessions

Concessions are compromises or adjustments made by one party in negotiations, often to reach an agreement or resolve a dispute.