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%