If expected sales are revised based on the first years


We are examining a new project. We expect to sell 6,200 units per year at $76 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $76 × 6,200 = $471,200. The relevant discount rate is 18 percent, and the initial investment required is $1,730,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ b. After the first year, the project can be dismantled and sold for $1,600,000. If expected sales are revised based on the first year’s performance, below what level of expected sales would it make sense to abandon the project?

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Financial Management: If expected sales are revised based on the first years
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