(Ignore Income Taxes in This Problem Based on the Data Given, the Annual Cost Savings Would

question 31

Multiple Choice

(Ignore income taxes in this problem.) Given the following data: $\begin{array}{lrr} \text { Present investment required. } &£ 10,000\\ \text {Net present value. } &£ 1,300\\ \text {Annual cost savings. } &£?\\ \text { Dis count rate. } &14 \%\\ \text {Life of the project. } &\text { 8 years } \\\end{array}$

Based on the data given, the annual cost savings would be (rounded)

• A)£4,024.
• B)£2,436.
• C)£1,875.
• D)£3,704.

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Definitions:

Average Cost Curve

A graphical depiction showing the cost per unit of output at different levels of production, reflecting the variability in total cost over volume.

Positive Profit

A financial gain that occurs when the revenues received from business activities exceed the expenses, costs, and taxes needed to sustain the activity.

Scale of Operation

The size at which a company or factory operates, often impacting its production efficiency and costs.

Long Run

pertains to a time period in economics during which all factors of production and costs are variable, allowing for full adjustment to any change.