We are examining a new project. We expect to sell 6,200 units per year at $76 net cash low apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $76 x 6,200 = $471,200. The relevant discount rate is 18 percent and th nitial investment required is $1,730,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. After the first year, the project can be dismantled and sold for $1,600,000. If expected sales are revised based on the first year's performance, below what level of expected sales would it make sense to abandon the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. NPV b. Level of expected sales units

We are examining a new project. We expect to sell 6,200 units per year at $76 net cash low apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $76 x 6,200 = $471,200. The relevant discount rate is 18 percent and th nitial investment required is $1,730,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. After the first year, the project can be dismantled and sold for $1,600,000. If expected sales are revised based on the first year's performance, below what level of expected sales would it make sense to abandon the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. NPV b. Level of expected sales units

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 3E

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