A small distillery is considering investing $2000 worth of development costs into a 5-year project that will produce bourbon over the next five years.

The company expects demand of 300 bottles in year 1. Projections indicate that the demand will grow by 10% each year thereafter. The company has no restriction on the number of bottles it can produce, so it expects to produce enough bottles to meet each yearly demand.

The unit selling price the company has forecast is $25 in year 1, $27 in year 2, $29 in year 3, $35 in year 4, and $40 in year 5.

Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500.

(Unless otherwise indicated, assume that all cash flows occur at the end of the year.)

(Don't worry about rounding the number of bottles to the nearest integer--this is just an estimate.)

1.

Suppose the company's initial cost projections may vary.

Determine the revised total profit from both variable costs of $11 to $15 in $1 increments and yearly fixed costs from $500 to $700 in $50 increments.

Which of the following indicates the highest and lowest total profit?

Question 4 options:

	Highest- $35,834.87 Lowest - $27,508.75
	Highest- $23,650.06 Lowest - $17,437.36
	Highest- $33,834.87 Lowest - $25,508.75
	Highest- $30,577.15 Lowest - $23,007.95