Given the Following Data for Division X: Division Y

question 66

Multiple Choice

Given the following data for Division X: Division Y would like to purchase 15,000 units each period from Division X.Division X has ample excess capacity to handle all of Division Y's needs.Division Y now purchases from an outside supplier at a price of $20.If Division X refuses to accept an $18 price internally,the company,as a whole,will be worse off by:

• A)$30,000.
• B)$75,000.
• C)$90,000.
• D)$120,000.

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Definitions:

Market Rate

The typical interest rate or cost of borrowing money in the general market, often referred to in terms of loans and savings.

Coupon Rate

The interest rate paid yearly on a bond, depicted as a percentage of its face value.

Premium On Bonds

The amount by which the selling price of a bond exceeds its face value.

Present Value Factors

The factors used in calculating the present value of a sum of money or a stream of cash flows given a specified rate of return.