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

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. At what level of sales should the firm be willing to abandon this project?

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