A Brewery Is Considering Two Potential Production Investments: Option a Costs

question 182

Multiple Choice

A brewery is considering two potential production investments: Option A costs an initial $2 million and will involve constant marginal cost of $5 Option B costs an initial $4 million and will involve constant marginal cost of $3 In order to make the calculations simple,assume that the annual capital cost is 10% of the total investment.At what production quantity per year would the brewery be indifferent between these two investment opportunities?

• A)20,000
• B)100,000
• C)200,000
• D)150,000

---

Definitions:

Depreciated Value

The value of an asset after accounting for depreciation, which is the reduction in value over time due to wear and tear, age, or obsolescence.

Delivery Van

A vehicle specifically designed and used for transporting goods rather than passengers.

Tax Purposes

A phrase referring to the reasons or objectives related to the assessment or payment of taxes.

Rises

In the context of graphs, refers to the upward movement of a function or value as it moves along the horizontal axis.