A
Adequate information:
HI expects annual operating cash flow of
To compute: NPV of the new product.
Introduction: The current value of a stream of payments from a business, project, or investment is determined using
B
Adequate information:
After the first year project can be sold for
To compute: The level of expected cash flow that makes sense to abandon the project.
Introduction: The liquidation value of an asset is another name for abandonment value. The general criteria for choosing whether to cease a product is that the project is abandoned whenever the salvage value of the product exceeds the net present value (NPV) of its anticipated cash flows.
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