We are examining a new project. We expect to sell 6,600 units per year at $60...

We are examining a new project. We expect to sell 6,600 units per year at $60 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $60 × 6,600 = $396,000. The relevant discount rate is 14 percent, and the initial investment required is $1,770,000. 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 $1,640,000. 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.)

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jeff jeffy answered 2 years ago

We are examining a new project. We expect to sell 6,600 units per year at $60...

We are examining a new project. We expect to sell 6,600 units per year at $60 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $60 × 6,600 = $396,000. The relevant discount rate is 14 percent, and the initial investment required is $1,770,000. After the first year, the project can be dismantled and sold for $1,640,000. Suppose you think it is likely that expected sales will be revised...

We are examining a new project. We expect to sell 5,500 units per year at $69...

We are examining a new project. We expect to sell 5,500 units per year at $69 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $69 × 5,500 = $379,500. The relevant discount rate is 19 percent, and the initial investment required is $1,540,000. After the first year, the project can be dismantled and sold for $1,260,000. Suppose you think it is likely that expected sales will be...

We are examining a new project. We expect to sell 7,100 units per year at $56...

We are examining a new project. We expect to sell 7,100 units per year at $56 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $56*7,100=$397,600. The relevant discount rate is 14%, and the initial investment required is $1,800,000. Suppose you think it is likely that expected sales will be revised upward to 10,800 units if the first year is a success and revised downward to 3,900 units if...

We are examining a new project. We expect to sell 6,200 units per year at $76...

We are examining a new project. We expect to sell 6,200 units per year at $76 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $76 × 6,200 = $471,200. The relevant discount rate is 18 percent, and the initial investment required is $1,730,000. After the first year, the project can be dismantled and sold for $1,600,000. Suppose you think it is likely that expected sales will be revised...

We are examining a new project. We expect to sell 5,400 units per year at $68...

We are examining a new project. We expect to sell 5,400 units per year at $68 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $68 × 5,400 = $367,200. The relevant discount rate is 18 percent, and the initial investment required is $1,530,000. After the first year, the project can be dismantled and sold for $1,250,000. Suppose you think it is likely that expected sales will be...

We are examining a new project. We expect to sell 5,200 units per year at $66...

We are examining a new project. We expect to sell 5,200 units per year at $66 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $66 × 5,200 = $343,200. The relevant discount rate is 17 percent, and the initial investment required is $1,510,000. After the first year, the project can be dismantled and sold for $1,230,000. Suppose you think it is likely that expected sales will be...

We are examining a new project. We expect to sell 6,400 units per year at $58...

We are examining a new project. We expect to sell 6,400 units per year at $58 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $58 × 6,400 = $371,200. The relevant discount rate is 12 percent, and the initial investment required is $1,750,000. After the first year, the project can be dismantled and sold for $1,620,000. Suppose you think it is likely that expected sales will be...

We are examining a new project. We expect to sell 5,800 units per year at $72...

We are examining a new project. We expect to sell 5,800 units per year at $72 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $72 × 5,800 = $417,600. The relevant discount rate is 15 percent, and the initial investment required is $1,690,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $= b....

We are examining a new project. We expect to sell 6,200 units per year at $76...

We are examining a new project. We expect to sell 6,200 units per year at $76 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $76 × 6,200 = $471,200. The relevant discount rate is 18 percent, and the initial investment required is $1,730,000. What is the base-case NPV? After the first year, the project can be dismantled and sold for $1,600,000. If expected sales are revised based on...

We are examining a new project. We expect to sell 6,700 units per year at $61...

We are examining a new project. We expect to sell 6,700 units per year at $61 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $61 × 6,700 = $408,700. The relevant discount rate is 15 percent, and the initial investment required is $1,780,000. After the first year, the project can be dismantled and sold for $1,650,000. Suppose you think it is likely that expected sales will be...

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We are examining a new project. We expect to sell 6,600 units per year at $60...

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