The Management of Rispoli Corporation Is Considering Introducing a New

question 27

Multiple Choice

The management of Rispoli Corporation is considering introducing a new product-a compact lawn blower.At a selling price of $38 per unit, management projects sales of 10, 000 units.The lawn blower would require an investment of $700, 000.The desired return on investment is 11%. The target cost per lawn blower is closest to:

• A)$33.63
• B)$30.30
• C)$38.00
• D)$42.18

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Definitions:

After-Tax Net Income

The amount of profit a company remains with after all tax expenses have been deducted from its total income.

Accounting Rate of Return

A financial metric used to assess the profitability of an investment, calculated as the average annual return over the investment's life divided by the initial investment cost.

Straight-Line Depreciation

An arrangement for apportioning the financial burden of a physical investment throughout its active life in equal yearly disbursements.

Accounting Rate of Return

A financial ratio used to measure the profitability of an investment, calculated as the average annual profit divided by the initial investment cost.