The Oakley-Brown, a Frozen Food Processor, Is Considering Buying a Curly-Fry

Multiple Choice

The Oakley-Brown, a frozen food processor, is considering buying a curly-fry extruder with potato preparation attachments for $90,000. It expects to sell 2,500 cases the first year and 4,500 cases for four years after that while the craze lasts. Price per case will be $30. Cost of goods, selling and administration expenses equal $62,500 in the first year and $100,500 in the subsequent years. What price drop will bring NPV to near zero if the company's hurdle rate is 14%?

A) $0.06
B) $0.15
C) $0.67
D) $1.00
E) $1.50