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Suppose we are examining a new project. To keep things relatively simple, lets say that...

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Finance

Suppose we are examining a new project. To keep things relatively simple, lets say that we expect to sell 100 units per year at $1 net cash flow apiece into perpetuity. In one year, we will know more about the project. If it looks like a long-term success, the expected sales will be revised upward to 140 units per year. If it does not, the expected sales will be revised downward to 45 units per year. The cost is $900, and the discount rate is 12 percent. The project can be dismantled and sold in one year for $700 if we decide to abandon it. What is the NPV of the project with the consideration of the managerial options? Should we take it?

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