A Factory Currently Produces Output That Sells for $125 Million

question 47

Multiple Choice

A factory currently produces output that sells for $125 million. Production costs are $100 million. Each year it is equally likely that the selling price of the output will be 25% higher or
30% lower. Assume the cost of capital is zero and that it will cost nothing to close the plant or
To reopen it. What is the present value of this factory if it exists for 2 years?

• A)$41.80
• B)$56.64
• C)$36.35
• D)$57.73

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Definitions:

Company Objectives

Specific, measurable goals set by a business aiming to guide its operational and strategic decisions.

Market Share

The percentage of an industry or market's total sales that is earned by a particular company over a specified time period.

Lowest-Price Offering

A pricing strategy where a company sets the cost of its product or service lower than that of its competitors to attract price-sensitive customers.

Marketing Mix

A framework used by marketers to analyze and implement the four critical aspects of marketing: product, price, place, and promotion.