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Margerit is reviewing a project with projected sales of 1,500 units a year, a cash flow of $40 a unit and a three year project life. The initial cost of the project is $95,000. THe relevant discount rate is 15%. Margerit has the option to abandon the project after one year at which time she feels she could sell the project for $60,000. At what level of sales should she be willing to abandon the project?

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This question was answered on Jun 24, 2016.Purchase Solution @ 29.44 USD

Solution: Let The level of sales at which, margerit would be willing to abandon the project be Q Cash Flow $ 40.00 per unit Discount Rate 15% or 0.15 Project can be sold after 1 Year for $ 60,000