Ottawa Manor Would Like to Buy Some Additional Land and Build

question 325

Multiple Choice

Ottawa Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $12.4 million. The CEO of the firm is quite conservative and will only do this
When the company has sufficient funds to pay cash for the entire construction project. Management
Has decided to save $235,000 a month for this purpose. The firm earns 7% compounded monthly
On the funds it saves. How long does the company have to wait before expanding its operations?

• A) 30.32 months
• B) 31.23 months
• C) 46.14 months
• D) 49.68 months
• E) 54.00 months

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Definitions:

U-shaped Cost Curve

A graphical representation showing that as output increases, average costs initially decrease, reach a minimum, and then increase.

Ambrosia

Often referred to in mythology as the food or drink of the gods, typically signifying something with an exquisite taste or smell.

Red Price

There is no standard definition for this term in economics; it may be used informally to denote a specific pricing strategy or condition but lacks a general meaning.

Bubble Gum

A variety of gum that can be blown into a bubble from the mouth.