A Company Is Considering Investing in a Project, Which Requires

question 121

Multiple Choice

A company is considering investing in a project, which requires the purchase of a new machine for $250,000.The asset has a six-year life, a CCA rate of 30%, and an expected salvage value of $30,000.The selling price of the product is $40 per unit, while the variable cost is $18 per unit and the fixed costs are $50,000 per year.The company's effective tax rate is 40% and cost of capital is 10%.Assume the asset class remains open after the asset is sold and the half-year rule applies for the first year.At what level of sales will the company break even?

• A)3,102 units
• B)4,011 units
• C)5,170 units
• D)6,685 units

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Definitions:

Procedural Fairness

Refers to the customer’s perception of the fairness of the process used to resolve complaints about service.

Zone of Tolerance

The zone of tolerance refers to the range within which customers are willing to accept variations in product or service delivery quality, influencing satisfaction and loyalty.

Desired Service

A specific assistance or function that consumers or clients seek to fulfill their needs.

Acceptable Service

A level of service that meets the basic requirements and expectations of customers, deemed satisfactory by the receiving party.