Multiple Choice
Brewster's is considering a project with a life of 5 years and an initial cost of $120,000.The discount rate for the project is 12 percent.The firm expects to sell 2,100 units a year at a net cash flow per unit of $20.The firm will have the option to abandon this project after three years at which time it could sell the project for $50,000.The firm is interested in knowing how the project will perform if the sales forecasts for Years 4 and 5 of the project are revised such that there is a 50 percent chance the sales will be either 1,400 or 2,500 units a year.What is the net present value of this project given these revised sales forecasts?
A) $23,617
B) $23,719
C) $25,002
D) $26,877
E) $28,745
Correct Answer:
Verified
Correct Answer:
Verified
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