Answered>Order 1294

You are the CEO of Wilson’s Meats

that

is considering investing in the project that will last

for 5 years. The project has some level of uncertainty after time 3. At that time

(time 3)

if

it is unsuccessful, project sales

would fall to 1,400 units

for each of the next two years

(years 4 and 5)

. Each unit generates a cash flow of $20.00. At year 3 the firm can abandon

the project for $50,000. At time 3 would you continue with the project or abandon

it if the

project is unsuccessful if the discount rate is 12 percent

?