Multiple Choice
Table 6.5
The T.H.King Company has introduced a new product line that requires two work centers,A and B for manufacture.Work Center A has a current capacity of 10,000 units per year,and Work Center B is capable of 12,500 units per year.This year (year 0) ,sales of the new product line are expected to reach 10,000 units.Growth is projected at an additional 1,000 units each year through year 5.Pre-tax profits are expected to be $30 per unit throughout the 5-year planning period.Two alternatives are being considered:
-Use the information in Table 6.5.What action,if any,should the King Company take?
A) Do nothing-neither alternative provides a positive net present value after five years.
B) Select Alternative #1.
C) Select alternative #2.
D) Either alternative may be selected,since the positive net present values are the same after five years.
Correct Answer:
Verified
Correct Answer:
Verified
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