Greg's Tasty Ice Cream Is Considering Building a New Ice

question 52

Multiple Choice

Greg's Tasty Ice Cream is considering building a new ice cream factory that costs $8.3 million.The company accountants believe that,not accounting for interest costs,building the factory will increase profits by $5 million the first year,$4 million the second year and have no value thereafter.Greg's Tasty Ice Cream should build the factory if the interest rate is

• A)3% but not if it is 4%.
• B)4% but not if it is 5%.
• C)5% but not if it is 6%.
• D)6% but not if it is 7%.

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Definitions:

Purchase Discount

A reduction in price offered by a seller to a buyer for prompt payment or payment within a specified period.

Inventory Shrinkage

The loss of products between purchase from a supplier and sale to a customer, often due to theft, damage, or errors.

Cost of Merchandise Sold

The total cost incurred by a company to sell its products, including the cost of the goods themselves plus any additional expenses.

Sales Tax

A tax on sales or on the receipts from sales, typically added to the purchase price by the seller.