Thompson & Son Has Been Busy Analyzing a New Product

Thompson & Son has been busy analyzing a new product.It has determined that an operating cash flow of €16,700 will result in a zero net present value, which is a company requirement for project
Acceptance.The fixed costs are €12,378 and the contribution margin is €6.20.The company feels
That it can realistically capture 10% of the 50,000 unit market for this product.Should the company
Develop the new product? Why or why not?

A) Yes; because 5,000 units of sales exceeds the quantity required for a zero net present
Value
B) Yes; because the internal break-even point is less than 5,000 units
C) No; because the firm can not generate sufficient sales to obtain at least a zero net present
Value
D) No; because the project has an expected internal rate of return of negative 100%
E) No; because the project will not pay back on a discounted basis