Use the Table for the Question(s)below

question 75

Multiple Choice

Use the table for the question(s) below.
-Panjandrum Industries,a manufacturer of industrial piping,is evaluating whether it should expand into the sale of plastic fittings for home garden sprinkler systems.It has made the above estimates of free cash flows resulting from such a decision (all quantities in millions of dollars) .There are some concerns that estimates of manufacturing expenses may be low,due to the rising cost of raw materials.What is the break-even point for manufacturing expenses,if all other estimates are correct and the cost of capital is 10%?

• A)$0.78 million
• B)$0.88 million
• C)$0.97 million
• D)$1.22 million

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales, remaining constant over a specified period.

Period Cost

Costs that are not directly tied to the production process and are instead expensed in the period they are incurred.

Break-even Sales

The amount of revenue from sales at which a business's expenses and income are equal, resulting in no net profit or loss.

Western Division

Typically refers to a geographic or organizational segment of a company located in the western region or sector it operates in.