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Expected level of annual sales

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Western Industrial Products is considering a project with a five-year life and an initial cost of $310,000. The discount rate for the project is 12 percent. The firm expects to sell 2,700 units a year. The cash flow per unit is $35. The firm will have the option to abandon this project at the end of year three (after year three's sales) at which time the project's assets could be sold for an estimated $60,000. The firm should abandon the project at the end of year three if the expected level of annual sales, starting with year 4, falls to _____ units or less. Ignore taxes.

  • 1,014 units
  • 114 units
  • 1,350 units
  • 2,150 units
  • 900 units

Reference no: EM132524961

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