The Quick Producers Co

question 185

Multiple Choice

The Quick Producers Co. is analyzing a proposed project. The company expects to sell 10,000 units, give or take 5 percent. The expected variable cost per unit is $6 and the expected fixed cost is $29,000. The fixed and variable cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $25,000. The tax rate is 34 percent. The sale price is estimated at $13 a unit, give or take 6 percent.

What is the net income under the best case scenario?

• A) $5,440.00
• B) $10,665.80
• C) $15,846.60
• D) $20,704.20
• E) $24,696.80

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Definitions:

Unlevered Cost

The cost of financing a project or investment without the impact of debt, or the cost of capital for a company with no debt.

Cost of Equity

The rate of return a company is expected to pay to its shareholders for their investment in the company's equity, often estimated using the Capital Asset Pricing Model (CAPM).