A Proposed 4-Year Project Has an Initial Cost of $236,000

A proposed 4-year project has an initial cost of $236,000, projected sales of 4,500 units a year, a cash flow of $32 a unit, and a discount rate of 11 percent. Assume all operating cash flows occur on the last day of each year. If the project is abandoned after two years, the project's assets can be sold for $150,000. Below what level of annual sales, starting in Year 3, should the project be abandoned?

A) 3,119 units
B) 2,737 units
C) 4,067 units
D) 3,516 units
E) 3,067 units

Correct Answer:

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