Thompson & Son Has Been Busy Analyzing a New Product

question 74

Multiple Choice

Thompson & Son has been busy analyzing a new product.It has determined that an operating cash flow of €16,700 will result in a zero net present value, which is a company requirement for project
Acceptance.The fixed costs are €12,378 and the contribution margin is €6.20.The company feels
That it can realistically capture 10% of the 50,000 unit market for this product.Should the company
Develop the new product? Why or why not?

• A)Yes; because 5,000 units of sales exceeds the quantity required for a zero net present
• Value
• B)Yes; because the internal break-even point is less than 5,000 units
• C)No; because the firm can not generate sufficient sales to obtain at least a zero net present
• Value
• D)No; because the project has an expected internal rate of return of negative 100%
• E)No; because the project will not pay back on a discounted basis

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Definitions:

Vertebral Arch

The structure in a vertebra that encloses the spinal cord, formed by pedicles and laminae.

Lamina

Part of the vertebral arch in the spine that forms the back part of the spinal canal which encloses and protects the spinal cord.

Spinous Processes

Spinous processes are the bony projections off the back of each vertebra that can be felt through the skin and serve for muscle attachment and movement of the spine.

Transverse Processes

Lateral projections from the vertebrae, serving as points of attachment for muscles and ligaments.