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Ben's is a sit-down restaurant that specializes in home-cooked meals

Ben's is a sit-down restaurant that specializes in home-cooked meals. Melissa's is a walk-in deli that specializes in specialty soups and sandwiches. Both firms are currently considering expanding their operations during the summer months by offering pre-wrapped donuts, sandwiches, and wraps at a local beach. Ben's currently has a WACC of 14 percent while Melissa's WACC is 10 percent. The expansion project has a projected net present value of $12,600 at a 10 percent discount rate and a net present value of -$2,080 at a 14 percent discount rate. Which firm or firms should expand and offer food at the local beach during the summer months?

A. Ben's only
B. Melissa's only
C. both Ben's and Melissa's
D. neither Ben's nor Melissa's
E. cannot be determined from the information provided

Shiny Tech, Inc. (STI) manufactures PC motherboards. The variable materials cost is $1.69 per unit, and the variable labor cost is $3.04 per unit. Suppose the firm incurs fixed costs of $750,000 during a year in which total production is 450,000 units and the selling price is $11.50 per unit. What is the cash break-even point?

A. 76,453 units
B. 88,652 units
C. 110,783 units
D. 128,907 units
E. 140,768 units.

Solution Summary

The solution discusses the NPV and the break-even point.

$2.19