Use the Following Information to Answer the Next Two Questions

question 34

Multiple Choice

Use the following information to answer the next two questions:
A firm's fixed costs are $5000.The firm charges $12 for each unit.For every additional unit the firm produces,it costs the firm $8.
-What's the firm's contribution margin?

• A)$12
• B)$10
• C)$8
• D)$4

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Definitions:

Average Accounting Return (AAR)

A financial ratio that represents the average net income divided by the average book value of the investment over its life, typically used in capital budgeting.

Target AAR

Desired average annual return; a financial goal for the average rate of return over a specific period typically set by investors for their investment portfolio.

Profitability Index (PI)

The profitability index is a ratio that calculates the present value of future cash flows from an investment divided by the investment's initial cost, used to assess the desirability of a project.

Internal Rate Of Return (IRR)

A financial metric used to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value (NPV) of all cash flows equal to zero.