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

Multiple Choice

Your firm is considering a project with a four-year life and an initial cost of $87,000. The discount rate for the project is 15 percent. The firm expects to sell 1,800 units a year. The cash flow per unit is $19. The firm will have the option to abandon this project after two years at which time they expect they could sell the project for $40,000. At what level of sales should the firm be willing to abandon this project?

A) 1,107 units
B) 1,295 units
C) 1,361 units
D) 1,540 units
E) 1,565 units