A Project Involves an Immediate Expenditure of $1 000, and Will

question 3

Multiple Choice

A project involves an immediate expenditure of $1 000, and will require additional expenditures of $100 a year for the next ten years, starting one year from now. After ten years it yields an income of $3 000. What is its rate of return?

• A)3.5%
• B)4.5%
• C)5.5%
• D)6.5%
• E)7.5%

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Definitions:

Unit Selling Price

The price levied for an individual unit of a product or service.

Break-even Analysis

A financial calculation to determine the sales volume at which a business neither makes a profit nor a loss.

Cost-volume-profit Analysis

An accounting method used to determine how changes in costs and volume affect a company's operating income and net income.

Sales Mix

The proportion of different products or services that a business sells, significant because it can affect the company's overall profitability depending on the contribution margin of each item.