If production volume increases from 16,000 to 20,000 units, a.total variable costs will increase by 25 percent. b.total costs wi
1 answer:
Answer:
The correct answer is option a.
Explanation:
The variable cost of producing a good or service is the cost incurred on the variable factors. the variable factors are the factor inputs that vary with volume or level of output.
The production volume here is increasing by 4,000 units.
The percentage increase in production volume
=
= 25%
Since, the production volume is increasing by 25% the total variable cost will also increase by 25%.
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Answer:
The answer and procedures of the exercise are attached in the following archives.
Explanation:
Consider this explanation too
The IRR is the project’s expected rate of return, assuming that intermediate cash flows also earn the IRR. If this return exceeds the cost of the capital invested in the project, the excess value goes to the firm’s shareholders. Therefore, independent projects whose IRR is greater than the WACC should be accepted.
Therefore in this case WACC of the project is 7% and IRR of the project is 1.86% which is less than WACC of the project. Hence the firm reject the project delta.
Calculation of IRR is based on Cash inflows and outflows for the number of years so that increase in cost of capital will not affect IRR.
