Precise Machinery Is Analyzing a Proposed Project

question 23

Multiple Choice

Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. What is the amount of the total costs per unit under the worst case scenario?

• A)$548.58
• B)$577.45
• C)$604.16
• D)$638.23
• E)$640.25

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Definitions:

Dividend Growth Rate

The pace at which a business boosts the dividends it distributes to its investors over a period.

Required Return

This is the minimum profit that an investor expects to make on an investment, reflecting the level of risk involved.

Constant Growth

A model assuming that the value of an investment grows at a steady, unchanging rate indefinitely.