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:

Intraocular Pressure

The fluid pressure inside the eye, essential for maintaining the eye's shape and proper optical function.

Near Point

The closest distance at which an object can be seen clearly by the eye, a measure of the eye's ability to accommodate.

Inverted

Turned upside down or inside out; in a context of sequences, means having the order reversed.

Macula

A specialized central region of the retina responsible for high-acuity vision.