The Management of Nerby Corporation Is Considering Introducing a New

question 13

Multiple Choice

The management of Nerby Corporation is considering introducing a new product--a compact lawn blower. At a selling price of $28 per unit, management projects sales of 40,000 units. The lawn blower would require an investment of $900,000. The desired return on investment is 20%.
-The desired profit according to the target costing calculations is:

• A)$1,120,000
• B)$224,000
• C)$940,000
• D)$180,000

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Definitions:

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for time value of money.

Payback Period

The duration required to recover the initial investment in a project or asset, based on the cash inflows that the investment generates.

Time Value

The principle that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Hurdle Rate

The minimum rate of return on an investment required by an investor or manager, used to assess its viability.