ABC CoHas Compiled These Estimates for a New 1-Year Project: Sales

question 27

Multiple Choice

ABC Co.has compiled these estimates for a new 1-year project: Sales of 1,650 units,± 5 percent; sales price of $17 a unit,± 1 percent; variable costs per unit of $7.49,± 3 percent; fixed costs of $3,800,± 1 percent; and depreciation of $2,200.The company bases its sensitivity analysis on the expected case scenario.If the company conducts a sensitivity analysis at a sales price of $16.25,what will be the earnings before interest and taxes?

• A)$8,265
• B)$8,454
• C)$8,530
• D)$8,709
• E)$8,510

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Definitions:

Credit Balance

A positive balance in a financial account, where the amounts received exceed the amounts spent.

Consolidated Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets, reflected in consolidated financial statements.

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and a share in the company's profitability through dividends.