Question 27 (20 points) We are examining an new project. We expect to sell 8,750 units...

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Question 27 (20 points) We are examining an new project. We expect to sell 8,750 units at $189 net cash flow a piece (we ignore CAA for the purpose of this question). The relevant discount rate is 14%, and the initial investment requirement is $5,500,000. a). What is the NPV? b). after the first year, the project can be dismantled and sold for $2,800,000. If expected sales are revised based on the first year's performance, when it would make sense to abandon the investment? In other words, at what level of expected sales investment requirement is $5,500,000. a). What is the NPV? b). after the first year, the project can be dismantled and sold for $2,800,000. If expected sales are revised based on the first year's performance, when it would make sense to abandon the investment? In other words, at what level of expected sales would it make sense to abandon the project? c). Explain how the $2,800,000 abandonment value can be viewed as the opportunity cost of keeping the project one year? Question 27 (20 points) We are examining an new project. We expect to sell 8,750 units at $189 net cash flow a piece (we ignore CAA for the purpose of this question). The relevant discount rate is 14%, and the initial investment requirement is $5,500,000. a). What is the NPV? b). after the first year, the project can be dismantled and sold for $2,800,000. If expected sales are revised based on the first year's performance, when it would make sense to abandon the investment? In other words, at what level of expected sales investment requirement is $5,500,000. a). What is the NPV? b). after the first year, the project can be dismantled and sold for $2,800,000. If expected sales are revised based on the first year's performance, when it would make sense to abandon the investment? In other words, at what level of expected sales would it make sense to abandon the project? c). Explain how the $2,800,000 abandonment value can be viewed as the opportunity cost of keeping the project one year?