Your firm is considering a project with a five-year life and an initial cost of €120,000.The discount rate for the project is 12%.The firm expects to sell 2,100 units a year.The cash flow per unit is €20.The firm will have the option to abandon this project after three years at which time it expects it could sell the project for €50,000.You are interested in knowing how the project will perform if the sales forecast for years four and five of the project are revised such that there is a 50% chance that the sales will be either 1,400 or 2,500 units a year.What is the net present value of this project given your sales forecasts?

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The Answer of Your firm is considering a project with a five-year life and an initial cost of €120,000.The discount rate for the project is 12%.The firm expects to sell 2,100 units a year.The cash flow per unit is €20.The firm will have the option to abandon this project after three years at which time it expects it could sell the project for €50,000.You are interested in knowing how the project will perform if the sales forecast for years four and five of the project are revised such that there is a 50% chance that the sales will be either 1,400 or 2,500 units a year.What is the net present value of this project given your sales forecasts?

Your Firm Is Considering a Project with a Five-Year Life