Solve the Problem. -A Firm Is Considering a New Product. the Accounting Department

question 120

Multiple Choice

Solve the problem.
-A firm is considering a new product. The accounting department estimates that the total cost, C(x) , of producing x units will be C(x) = 95x + 3720. The sales department estimates that the revenue, R(x) , from selling x units will be R(x) = 105x, but that no more than 987 units can be sold at that price. Find and interpret (R -C) (987) .

• A) -$6150 loss, cost exceeds income
• B) $6150 profit, income exceeds cost It is not worth it to develop product. It is worth it to develop product.
• C) $201,120 profit, income exceeds cost
• D) $1359 profit, income exceeds cost It is worth it to develop product. It is worth it to develop product.

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Definitions:

Required Rate Of Return

This is the minimum return that investors expect or demand for an investment to be considered worthwhile.

Market Price

The contemporary market price for acquiring or disposing of an asset or service.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, factoring in the time value of money.

Growth Opportunities

Potential scenarios or investments that could lead to an increase in business scale, revenue, or profits.