Dressler Technologies Is Considering a Project with a 3-Year Life

Dressler Technologies is considering a project with a 3-year life and an initial cost of $87,000.The discount rate for the project is 14.5 percent.The firm expects to sell 1,300 units on the last day of each year.The cash flow per unit is $32.The firm will have the option to abandon this project at the end two years (after year 2 sales) at which time the project's assets could be sold for an estimated $30,000.The firm's managers are interested in knowing how the project will perform if the sales forecast for year 3 of the project is revised such that there is a 50/50 chance that the sales will be either 1,000 or 1,400 units a year.What is the net present value of this project at time zero given the current sales forecasts?

A) -$3,474
B) -$2,526
C) $7,426
D) $8,192
E) $8,887

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free