Question
A project under consideration has a net present value of $5,000 for a required investment of $30,000. There are no other investment options at this
A project under consideration has a net present value of $5,000 for a required investment of $30,000. There are no other investment options at this time. However, the assumed discount rate used to calculate the net present value is 10%. On the basis of this information alone, this project should
| A. | definitely be rejected because $10,000 is only 17% of $60,000. |
| B. | be rejected on the basis that the project loses $50,000. |
| C. | be accepted if the cost of capital is greater than or equal to 20 percent. |
| D. | probably be approved since the net present value is greater than zero. |
Tinley Division has the capacity to make 1,500 units of an intermediate good that is sold both internally and on the open market for a price of $28 each. To make the product, Tinley incurs $6 of variable cost per unit and $12 of fixed costs per unit. What is the minimum price Tinley would accept for an internal transfer of 1,000 units of the product if the division is operating at 50% capacity?
| A. | $12.00 per unit |
| B. | $ 6.00 per unit |
| C. | $18.00 per unit |
| D. | $28.00 per unit |
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