We are examining a new project. We expect to sell 7,000 units per year at $47 net cash flow apiece for the next 15 years.

We are examining a new project. We expect to sell 7,000 units per year at $47 net cash flow apiece for the next 15 years. In other words, the annual operating cash flow is projected to be $47 × 7,000 = $329,000. The relevant discount rate is 20 percent, and the initial investment required is $1,410,000. Suppose you think it is likely that expected sales will be revised upward to 9,800 units if the first year is a success and revised downward to 3,500 units if the first year is not a success. The project can be dismantled after the first year and sold for $1,100,000.