A Project Has an Initial Cost of $94,000 for Equipment

question 219

Multiple Choice

A project has an initial cost of $94,000 for equipment, which will be depreciated straight-line to zero over the five-year life of the project. There is no salvage value on the equipment. No working capital is required. Sales are estimated at 6,000 units at a selling price of $31.40 per unit. Variable costs are $22.80 and fixed costs are $41,600. The required rate of return is 14% and the marginal tax rate is 35%. If the sales quantity increases by 100 units, the net present value will increase by:

• A) $667
• B) $897
• C) $1,364.
• D) $1,919.
• E) $2,952

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Definitions:

Within-Group Variance

The measure of variability of data within a single group, reflecting how spread out the data points are around the group mean.

SSA

SSA stands for Social Security Administration, a government agency overseeing social security, a social insurance program consisting of retirement, disability, and survivors benefits.

SSB

Sum of Squares Between, a measure used in statistical analysis to describe the variability between groups.

SST

Total sum of squares in statistical analysis, reflecting the total variation in a dataset.