7A Company A sets price equal to cost plus 60%. Recently, Company A charged a customer a price of $42 for an item. What was the cost of the item to Company A? a $26.25 b $42 c $25.20 d $67.20 e $40.32 Question 7B Company A has just designed a new product with a target cost of $64. Company A requires new product to have a profit of 20%. What is the target price for the new product? a $64 b $12.80 c $320 d $80 e $53 Question 7C The capital investment decision making model that assumes that each cash inflow is reinvested at the required rate of return is a net present value. b internal rate of return. c payback period. d accounting rate of return. e none of these. Question 7D The best model for choosing the best of several competing projects is a net present value. b internal rate of return. c payback period. d accounting rate of return. e none of these. Question 7E One disadvantage of the payback period is that a it is sometimes used as a crude measure of risk. b managers may choose investments with quick payback periods to maximize short term criteria on which their own bonuses, etc. may be based. c it cannot be used for investments with unequal cash inflows. d it cannot be used if the entire cost of the investment does not occur immediately. e all of these. Question 7F The reason that a discount factor in year 3 is less than a discount factor in year 2 is that a cash flows are uneven. b compounding does not occur. c cash flows are even. d present value is positive. e a dollar received in three years is worth less than a dollar received in two years