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Brewster’s is considering a project with a 5-year life and an initial cost of $120,000. The discount rate for the project is 12 percent. The firm expects to sell 2,100 units a year at a net cash flow per unit of $20. The firm will have the option to abandon this project after three years at which time it could sell the project for $50,000. The firm is interested in knowing how the project will perform if the sales forecasts for Years 4 and 5 of the project are revised such that there is a 50 percent chance the sales will be either 1,400 or 2,500 units a year. What is the net present value of this project given these revised sales forecasts?

A. $23,617

B. $23,719

C. $25,002

D. $26,877

E. $28,745 (This is the correct answer stated. How to you find this NPV?)

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Deanna Hettinger
Deanna HettingerLv2
28 Sep 2019

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Note: The original question asked to find NPV(which I already did). This question asks for revised NPV and two new conditions. Plz help.

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