The Financial Calculator Company Proposes to Invest $12 Million in a New

question 22

Multiple Choice

The Financial Calculator Company proposes to invest $12 million in a new calculator-making plant. Fixed costs are $3 million per year. A financial calculator costs $10 per unit to manufacture and sells for $30 per unit. If the plant lasts for four years and the cost of capital is 20 percent, what is the break-even level of annual sales? (Assume that revenues and costs occur at the end of each year. Assume no taxes.) Round to the nearest 1,000 units.

• A)150,000 units
• B)342,000 units
• C)382,000 units
• D)300,000 units

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Definitions:

Natural Resource Economics

A branch of economics that studies the optimal use and management of natural resources.

Harvesting

The process of gathering ripe crops from the fields, or in a broader business context, the act of capturing value from a business initiative or venture once it has matured.

Real GDP

The measure of the value of economic output adjusted for price changes (inflation or deflation), providing a more accurate reflection of an economy's size and growth.

Energy Consumption

The amount of energy used by devices, systems, or processes, typically measured over a specific time frame.