1 - A soft drink company has researched the possibility of marketing a new low-calorie beverage, in a study region. The expected profits depend largely on the sales volume, and there is some uncertainty as to the precision of the sales-forecast figures. The estimated investment is $173,000 while the anticipated profits are $49,500 per year for the next 6 years. If the company's MARR = 15%, what is the minimum volume of sales for the project to breakeven, if there is a profit of $6.70 per unit volume?
a) 7256 units
b) 6824 units
c) 5684 units
d) 5019 units
2 - (True/False) A payback period in refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point.
Let the volume be x such that NPV = 0
6.70x*PVAF(15%, 6 years)- 173,000 = 0
6,70x*3.7845 – 173,000 = 0
X = 6,822.80 units
i.e. 6,824 units (approx.)
Hence, the answer is b) 6824 units
2.TRUE
Payback period is the time required to recoup original investment
Hence, the given statement is True
1 - A soft drink company has researched the possibility of marketing a new low-calorie beverage, in a study region. The expected profits depend largely on the sales volume, and there is some uncertain...