Posted: September 10th, 2023

NPV of the Project Assignment

We are examining a new project. We expect to sell 6,700 units per year at $61 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $61 6,700 $408,700 The relevant discount rate is 15 percent, and the initial investment required is $1,780,000 After the first year, the project can be dismantled and sold for $1,650,000. Suppose you think it is likely that expected sales will be revised upward to 9,700 units if the first year is a success and revised downward to 5,300 units if the first year is not a success. Suppose the scale of the project can be doubled in one year in the sense that twice as many units can be produced and sold. Naturally, expansion would be desirable only if the project were a success. This implies that if the project is a success, projected sales after expansion will be 19,400. Note that abandonment is an option if the project is a failure.

If success and failure are equally likely, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

What Citation Formats Do You Support?

We hear “Can you write in APA or MLA?” all the time—and the answer’s a big yes, plus way more! Our writers are wizards with every style—APA, MLA, Harvard, Chicago, Turabian, you name it—delivering flawless formatting tailored to your assignment. Whether it’s a tricky in-text citation or a perfectly styled reference list, they’ve got the skills to make your paper academically spot-on.

NPV

What is the value of the option to expand? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Option value. Get Finance homework help today

Tags: 1500 Words Assessment Task, Ace Homework Tutors, Assignment Homework Help & Answers, Bishops Writing Bureau