One of Modular Products (MP)customers Would Like to Obtain a 6-Month

question 34

Multiple Choice

One of Modular Products (MP) customers would like to obtain a 6-month option to purchase 500,000 tables for $119 each.These tables currently sell for $110 each.Assume u equals 1.0994 and d equals .9096.What price should MP charge for this option if the annual risk-free rate is 3.2 percent? Round your answer to the nearest $100.

• A)$338,400
• B)$421,900
• C)$598,100
• D)$479,900
• E)$533,600

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Definitions:

Sales

Sales represent the total revenue earned from goods or services sold by a company during a certain period.

Gross Profit Margin

A financial ratio that indicates the percentage of revenue that exceeds the cost of goods sold, highlighting the efficiency in producing and selling products.

Gross Profit Amount

The difference between sales revenue and the cost of goods sold before accounting for other expenses, indicating how efficiently a company uses labor and supplies in production.

Periodic Inventory System

A method of inventory valuation where updates to the inventory account occur at periodic intervals, rather than continuously.