Question

You are hired as a consultant to decide if your client should purchase a new, highly specialized, piece of equipment. The product to be produced by this equipment is forecast to have a total worldwide demand of 15,000 units over the entire product life. The initial investment to acquire and install the equipment is $256,000. The variable cost to produce each unit will be $15 and the selling price for the finished product will be $30. Which of the following best describes the situation the firm is facing?

a. the co. will recover its initial investment
b. the co. 's total margin will be less than its investment
c. its a good investment
d. the break-even is lower than the 15,000 units that are expected to sell.
e. all of the above

Answer 1

e. all of the above

Step-by-step explanation:

In the situation described, the company is faced with a good business proposition as the asset will bring in enough returns to cover the initial outlay made on purchase and allow the company record a net profit on the transaction.