A Project Has a Four-Year Life and an Initial Cost

question 84

Multiple Choice

A project has a four-year life and an initial cost of $84,000. This project has been assigned a 15% required rate of return. The selling price per unit has been set at $33.00. Annual fixed costs are $67,500 with variable costs of $28.90 per unit. What is the financial break-even quantity if taxes are ignored?

• A) 16,463
• B) 17,897
• C) 18,419
• D) 23,640
• E) 29,422

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Definitions:

Indefinite Life

Refers to intangible assets that are not expected to have a predictably limited lifespan and therefore are not amortized.

Amortized

The process of gradually writing off the initial cost of an asset or reducing debt over a period, typically in regular, fixed payments that cover both principal and interest.

Research and Development

activities in connection with corporate or governmental innovation. R&D is a component of innovation and is situated at the front end of the innovation lifecycle.

Accumulation of Cash

Accumulation of cash refers to the process of systematically saving and collecting cash within a company for future use, often for investment, operational needs, or as a reserve.