The ABC Corporation Is Considering Introducing a New Product,which Will

question 23

Multiple Choice

The ABC Corporation is considering introducing a new product,which will require buying new equipment for a monthly payment of $5,000.Each unit produced can be sold for $20.00.ABC incurs a variable cost of $10.00 per unit.Suppose that ABC anticipates selling 100 units of the new product next month.Moreover,they would like to realize a monthly profit of $5000.What should the selling price per unit be to realize this profit?

• A)$100
• B)$120
• C)$130
• D)$115
• E)$110

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Definitions:

Dutch Auction

A method for pricing shares (or other assets) where the price is reduced until all offered shares are sold to bidders, effectively finding the market clearing price.

Shares

Units of ownership interest in a corporation or financial asset, providing a proportion of the profits to shareholders.

Firm Commitment Underwriting

A method of underwriting where the underwriter commits to buying all the securities from the issuer and selling them to investors, assuming full financial responsibility for any unsold securities.

Underwriting Spread

The difference between the price at which investment bankers buy an issuance from the issuer and the price at which they sell it to the public.