Asked by louis rojas on Apr 24, 2024
Verified
Given: Very probable sales: $400,000.$300,000 could be borrowed at 8 percent interest for one year to purchase inventory.Total selling costs: $17,000.This investment project
A) probably would be carried out.
B) probably would not be carried out.
C) would be carried out only if the interest rate were higher.
Investment Project
A specific plan or initiative undertaken by a business or organization involving capital investment aimed at achieving certain financial or strategic goals.
Interest
The cost paid by a borrower for the use of borrowed money, or the income earned by an investor on their investment.
Inventory
The total amount of goods and materials held in stock by a business, intended for sale or production purposes.
- Compute and decipher anticipated profit margins and comprehend their significance in making investment choices.
- Comprehend the role of interest rates in determining investment decisions and costs of opportunities not taken.
Verified Answer
MR
Melissa RamosMay 02, 2024
Final Answer :
A
Explanation :
The probable sales of $400,000 outweigh the total cost of $317,000 ($300,000 borrowed at 8% interest + $17,000 selling costs). Therefore, this investment project would likely be carried out.
Learning Objectives
- Compute and decipher anticipated profit margins and comprehend their significance in making investment choices.
- Comprehend the role of interest rates in determining investment decisions and costs of opportunities not taken.