Isabelle is reviewing a project with projected sales of 1,500 units a year,a cash flow of $38 a unit,and a project life of 4 years.The initial cost of the project is $87,000.The relevant discount rate is 12 percent.She has the option to abandon the project after 1 year at which time she feels she could sell the project for $50,000.At what level of sales should she be willing to abandon the project?

Question

Quizplus · Accepted Answer

$50,000 = (Q × $38)[(1 - 1 / 1.12^4-1)/ 0.12] Q = 548 units

Isabelle Is Reviewing a Project with Projected Sales of 1,500