NF Toy Company Is Unsure of Whether to Sell Its

question 60

Multiple Choice

NF Toy Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and NF Toy would sell it for $52. The cost to assemble the product is estimated at $17 per unit and the company believes the market would support a price of $68 on the assembled unit. What decision should NF Toy make?

• A) Sell before assembly, the company will be better off by $1 per unit.
• B) Sell before assembly, the company will be better off by $16 per unit.
• C) Process further, the company will be better off by $23 per unit.
• D) Process further, the company will be better off by $11 per unit.

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Definitions:

Rights Offerings

A corporate approach to raising capital by giving existing shareholders the opportunity to buy additional shares directly from the company at a predetermined price, usually at a discount.

Industrialized Nations

Countries with developed economies characterized by significant levels of industrial output and infrastructure.