CanDo SA Is Analyzing a Proposed Project

question 51

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 pessimistic case scenario?

• A)-€566.02
• B)-€422.40
• C)-€278.78
• D)€3,554.50
• E)€5,385.60

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Definitions:

Equity Theory

A theory in social psychology and organizational behavior that explains how individuals perceive fairness in distribution of resources within interpersonal relationships, leading to feelings of satisfaction or dissatisfaction.

Input to Outcome

The relationship or correlation between contributed resources or efforts (inputs) and the results or achievements (outcomes).

Fairness of Rewards

The perceived equity and justice of the distribution of outcomes and rewards among individuals or groups, influencing their satisfaction and motivation.

Perceived Inequity

The feeling of being unfairly treated when comparing one's own effort-reward ratio to the effort-reward ratio of others.