What is equivalent annual cost for project

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Reference no: EM131930182

1. A project has expected sales of 6,000 units, a selling price of $29 a unit, variable costs equal to 60% of sales, fixed costs of $32,000, and depreciation of $9,500. Assume that total revenue can increase by 12%, variable costs can decrease to 58% of sales, and fixed costs can decrease by 5% in an optimistic situation. What would the pretax profits be, per year, if the optimistic situation should occur? Show your computations

A. $39,475

B. $41,949

C. $50,875

D. $53,437

2. What is the equivalent annual cost for a project that requires a $30,000 investment at time zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%?

A. $16,768.92

B. $19,463.92

C. $22,618.83

D. $23,437.66

Reference no: EM131930182

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