You Are Hired as a Consultant to Decide If Your

Multiple Choice

You are hired as a consultant to decide if your client should purchase a new, highly specialized piece of equipment. The product to be produced by this equipment is forecast to have a total worldwide demand of 15,000 units over the entire product life. The initial investment to acquire and install the equipment is $256,000. The variable cost to produce each unit will be $15, and the selling price for the finished product will be $30. Which of the following best describes the situation the firm is facing?

A) The company will recover its initial investment.
B) The company's total margin will be less than its investment.
C) It is a good investment.
D) The break-even is lower than the 15,000 units that are expected to sell.
E) All of these choices are correct.