You Are Hired as a Consultant to Decide If Your

question 41

Multiple Choice

You are hired as a consultant to decide if your client should purchase a new, highly specialized, piece of equipment.The product to be produced by this equipment is forecast to have a total worldwide demand of 15,000 units over the entire product life.The initial investment to acquire and install the equipment is $256,000.The variable cost to produce each unit will be $15 and the selling price for the finished product will be $30.Which of the following best describes the situation the firm is facing?

• A)The company will recover its initial investment
• B)The company's total margin will be less than its investment
• C)It's a good investment
• D)The break-even is lower than the 15,000 units that are expected to sell
• E)All of the above