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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?
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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