Use the Figure for the Question(s) Below

question 61

Multiple Choice

Use the figure for the question(s) below.
-A company planning to market a new model of motor scooter analyzes the effect of changes in the selling price of the motor scooter, the number of units that will be sold, the cost of making the motor scooter, the effect on Net Working Capital, and the cost of capital for the project. They predict that the break-even point for sales price for the motor scooter is $2,480. What does this mean?

• A) If the motor scooter is sold for $2,480, then the project will make a profit.
• B) If the motor scooter is sold for $2,480, then the net present value (NP
• V) for the product will be zero.
• C) The predicted selling price of the motor scooter is $2,480.
• D) The maximum that the motor scooter can sell for and still make the project have a positive net present value (NP
• V) is $2,480.

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Definitions:

Net Loss

Occurs when a company's expenses exceed its revenues during a specific period of time, indicating a negative financial performance.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered or used but not yet paid for.

Cash Sales

Transactions where payment is made in cash at the time of purchase.

Sales Discounts

Reductions in the price of goods or services provided to customers, usually as an incentive to encourage prompt payment.