Andrew Is Interested in Entering the Catfish Farming Business

question 4

Multiple Choice

Andrew is interested in entering the catfish farming business.He estimates if he enters this business,his fixed costs would be $50,000 per year and his variable costs would equal 30 percent of sales.If each catfish sells for $2,how many catfish would Andrew need to sell to generate a profit that is equal to 10 percent of sales?

• A)40,000
• B)41,667
• C)35,000
• D)No level of sales can generate a 10 percent net return on sales.

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Definitions:

Profitable Projects

Initiatives undertaken by a business that are expected to generate earnings exceeding their costs.

Clientele Effect

A theory suggesting that certain stocks attract particular types of investors based on dividend policies or investment strategies.

Residual Dividend Policy

A policy where dividends paid to shareholders are set based on the earnings left over after all operational and expansion-related expenses are covered.

New-Stock Dividend

A new-stock dividend is a payment made by a corporation to its shareholders in the form of additional shares rather than cash.