Use the Table for the Question(s)below

question 82

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) .It is thought that if marketing expenses are increased by 40%,then revenues will rise.By how much will revenues have to rise for the net present value (NPV) of the project to increase?

• A)at least 2.0%
• B)at least 2.9%
• C)at least 3.2%
• D)at least 3.8%
• E)at least 4.1%

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, rent for the production facility, and salaries of production supervisors.

Raw Materials

The basic substances from which products are made, typically used in the initial stages of the manufacturing process.

Work in Process

Inventory representing partially completed goods, which are still undergoing manufacturing processes.

Indirect Materials

Materials that are used in the production process but are not directly traceable to a finished product.