CanDo SA Is Analyzing a Proposed Project

question 19

Multiple Choice

CanDo SA is analyzing a proposed project.The company expects to sell 12,000 units,give or take 4%.The expected variable cost per unit is €7 and the expected fixed cost is €36,000.The fixed and variable cost estimates are considered accurate within a plus or minus 6% range.The depreciation expense is €30,000.The tax rate is 34%.The sale price is estimated at €14 a unit,give or take 5%.The company bases its sensitivity analysis on the expected case scenario.What is the earnings before interest and taxes under the optimistic case scenario?

• A)€22,694.40
• B)€24,854.40
• C)€37,497.60
• D)€52,694.40
• E)€67,947.60

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Definitions:

Accounting Standards

Rules and guidelines set by authoritative bodies that dictate how financial transactions and statements should be reported and maintained.

Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Subsidiary

A company that is completely or partly owned and partly or wholly controlled by another company, known as the parent company.

Parent

In business and accounting, a parent entity controls one or more subsidiary entities.