Level of expected sales, If expected sales are revised

Level of expected sales

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Reference no: EM131822150

We are examining a new project. We expect to sell 5,000 units per year at $64 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $64 × 5,000 = $320,000. The relevant discount rate is 13 percent, and the initial investment required is $1,610,000.

a. What is the base-case NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

NPV $

b. After the first year, the project can be dismantled and sold for $1,210,000. 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. Round your answer to the nearest whole number.)

Level of expected sales units

Reference no: EM131822150

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