The BobIU Computer Graphics Co

question 15

Multiple Choice

The BobIU Computer Graphics Co. has just produced a new multimedia graphics chip which will cost $6,000,000 this year to put into production. They anticipate net cash flows of $3 million next year, $2million, $1 million, $.5 million, $.25 million and then $0 over each of the following years. The two owners require a 15% return on their investment. The value of this investment to the firm is:

• A) $750,000.
• B) -$811,329.97.
• C) $556,462.71.
• D) $652,173.91.
• E) -$371,782.85.

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Definitions:

Variable Costs

Expenses that vary directly with the amount of output or business operations.

Workers

Individuals engaged in a professional or labor activity to earn wages or salaries.

Average Total Costs

The total cost of production divided by the number of units produced, representing the average cost per unit.

Physical Capital

Tangible assets used in the production of goods and services, such as machinery, buildings, and equipment.