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Prawns Galore, a Prawn Harvesting Business in Southeast Queensland, Has

Question 110

Multiple Choice

Prawns Galore, a prawn harvesting business in Southeast Queensland, has a 30-year loan on its prawn trawling boat.The annual loan payment is $25 000 and the boat has a market (salvage) value that exceeds its outstanding loan balance.Prior to the 2001 prawn harvesting season, Prawns Galore's accountant predicted that at expected market prices for prawns, Prawns Galore would have a net loss of $75 000 dollars after paying all 2001 expenses (including the annual loan payment) .In this case, Prawns Galore should:


A) continue to operate even though it predicts a loss of $75 000
B) not produce and experience a loss of $25 000
C) not produce and experience a loss of $75 000
D) continue to operate because expected profits will rise in the future

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