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Author Question: A maker of kitchenware is planning on selling a new chef-quality kitchen knife. The manufacturer ... (Read 119 times)

magmichele12

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on: Jul 9, 2019
A maker of kitchenware is planning on selling a new chef-quality kitchen knife. The manufacturer expects to sell 1.6 million knives at a price of $120 each. These knives cost $80 each to produce. Selling, general, and administrative expenses are $500,000. The machinery required to produce the knives cost $1.4 million, depreciated by straight-line depreciation over five years. The maker determines that the EBIT break-even point for units sold and sale price is less than these estimates and that the EBIT break-even point for costs per unit, SG&A, and depreciation are greater than these estimates, so decides to go ahead with manufacturing the knife. Was this the correct decision?
◦ Yes, since a positive EBIT ensures that the project will have a positive net present value (NPV).
◦ No, since the cost per unit should be greater than the EBIT-break even point for cost of goods if the project is to have a positive EBIT.
◦ Yes, since if the estimates for each parameter are correct , the EBIT will be positive.
◦ It cannot be determined whether the decision was correct, since other factors contributing to the project's net present value (NPV), such as the upfront investment, have not been included in the analysis.
Fundamentals of Corporate Finance ¦ Berk, DeMarzo, Harford ¦ 2nd Edition
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Marked as best answer by magmichele12 on Jul 9, 2019

moormoney

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Reply #1 on: Jul 9, 2019
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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magmichele12

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Reply #2 on: Jul 9, 2019
TY


moormoney

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Reply #3 on: Jul 9, 2019
You're welcome


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