A New Product, an Automated Crepe Maker, Is Being Introduced

question 377

Multiple Choice

A new product, an automated crepe maker, is being introduced at Knutt Corporation. At a selling price of $38 per unit, management projects sales of 78,000 units. Launching the crepe maker as a new product would require an investment of $260,000. The desired return on investment is 15%. The target cost per crepe maker is closest to: (Round your answer to 2 decimal places.)

• A) $37.50
• B) $45.42
• C) $45.80
• D) $38.00

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Definitions:

Monthly Compounded

Interest that is calculated on the principal and previously earned interest once every month.

Nominal Rate

The advertised or stated rate of interest, not including the effects of inflation or compounding.

RRSP

Registered Retirement Savings Plan, a savings and investment vehicle for Canadians to save for retirement in a tax-efficient way.

Compounded Rate

The rate at which interest is calculated on the initial principal and the accumulated interest of previous periods.