Cantor's Has Been Busy Analyzing a New Product

question 62

Multiple Choice

Cantor's has been busy analyzing a new product.Thus far,management has determined that an OCF of $218,200 will result in a zero net present value for the project,which is the minimum requirement for project acceptance.The fixed costs are $329,000 and the contribution margin per unit is $211.The company feels that it can realistically capture 2.5 percent of the 110,000 unit market for this product.The tax rate is 34 percent and the required rate of return is 11 percent.Should the company develop the new product? Why or why not?

• A)Yes; The project's required rate of return exceeds the expected IRR.
• B)Yes; The expected level of sales exceeds the required level of production.
• C)No; The required level of production exceeds the expected level of sales.
• D)No; The IRR is less than the required rate of return.
• E)No; The project will never payback on a discounted basis.

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Definitions:

Product Service

A product service is a combination of goods and services provided to consumers, often enhancing the value of a physical product through additional support or amenities.

Lagged Effect

A delayed response to an action or event, wherein the full impact is not immediately observable and unfolds over time.

Imc Efforts

Integrated Marketing Communications efforts, which aim to ensure that all forms of communications and messages are carefully linked together to create a seamless customer experience.

Marketing Communication

The various methods and strategies used by companies to convey promotional messages about their products and brands to their target audience.