Question -
1. A business received an offer from an exporter for 30,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:
Domestic unit sales price $22
Unit manufacturing costs:
Variable 11
Fixed 6
What is the amount of the gain or loss from acceptance of the offer?
A) $50,000 gain
B) $40,000 gain
C) $30,000 loss
D) $150,000 gain
2. Motel Corporation is analyzing a capital expenditure that will involve a cash outlay of $208,240. Estimated cash flows are expected to be $40,000 annually for seven years. The present value factors for an annuity of $1 for 7 years at interest of 6%, 8%, 10%, and 12% are 5.582, 5.206, 4.868, and 4.564, respectively. The internal rate of return for this investment is:
A) 6%
B) 12%
C) 10%
D) 8%