We are examining a new project. We expect to sell 9,000 units per year at $45 net cash
flow apiece for the next 20 years. In other words, the annual operating cash flow is
projected to be $45 × 9,000 = $405,000. The relevant discount rate is 14 percent, and
the initial investment required is $1,730,000. After the first year, the project can be
dismantled and sold for $1,350,000. If expected sales are revised based on the first
year's performance, it would make sense to abandon the investment if the sales are less
than which of the following number of units?
A. 4,580 units
B. 4,620 units
C. 4,750 units
D. 4,810 units
E. 5,020 units
Ron leases a car from Uptown Motors and pays $225 a month as a lease payment.
Which one of the following terms applies to Ron?
Moore Industries has agreed to be acquired by Scott Enterprises for $22,000 worth of
Scott Enterprises stock. Scott Enterprises currently has 7,500 shares of stock
outstanding at a price of $28 a share. Moore Industries has 1,800 shares outstanding at a
price of $12 a share. The incremental value of the acquisition is $1,100. What is the
value per share of Scott Enterprises stock after the acquisition?