Rosetone Retail Sells One Product with a Variable Cost of $3.50

question 55

Multiple Choice

Rosetone Retail sells one product with a variable cost of $3.50 per unit.The demand at different prices to be charged is shown below: $$\begin{array} { c c } \text { Units Dem anded } &\text { Unit Price } \\10,000 & \$ 9 \\15,000 & \$ 8 \\20,000 & \$ 7 \\25,000 & \$ 6\end{array}$$ If fixed costs are $42,000, what price should Rosetone charge in order to maximize profits?

• A)$9
• B)$8
• C)$7
• D)$6

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Definitions:

Debt Financing

A method of funding in which a company raises capital by borrowing money, agreeing to repay the principal amount along with interest on a specified schedule.

MM Model

The Modigliani-Miller theorem, proposing that in perfect markets, the value of a firm is unaffected by its capital structure.

Miller Model

A model formulated by Merton Miller, part of the Modigliani-Miller theorem, which discusses the irrelevance of capital structure for a company's market value under certain assumptions.

Corporate Taxes

Taxes imposed on the income or profit of corporations, varying widely by country and affecting companies' net income.