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1. Ajax Corporation is performing a sensitivity analysis on one of its product. The product currently sells for $210 per unit, with variable cost of $90 per unit and fixed costs of $400,000. Ajax currently sells 12,000 units of this product. Ajax is considering raising its price by 15%. If prices increase, then it is expected that units sold will decrease by 10%. Calculate the change in operating income.
A. $196,200 decrease
B. $248,500 decrease
C. $196,200 increase
D. $248,500 increase
Explanation:
2. Market interest rates have risen substantially in the five years since an investor purchased Treasury bonds that were offering a 7 percent return. If the investor sells now she is likely to receive:
A. greater than a 7 percent total return.
B. less than a 7 percent total return.
C. a 7 percent total rate of return.
D. a 7 percent nominal return but less than a 7 percent real return.
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