Audiocables, inc., is currently manufacturing an adapter that has a variable cost of $0.75 per unit and a selling price of $1.50 per unit. fixed costs are $14,000. current sales volume is 30,000 units. the firm can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $6,000. variable costs would increase to $0.90, but sales volume should jump to 50,000 units due to a higher-quality product. should audiocable buy a new equipment?

Which of the following statements is correct? stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. potential conflicts between stockholders and bondholders are increased if a firm's bonds are convertible into its common stock. takeovers are most likely to be attempted if the target firm’s stock price is above its intrinsic value. one advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership.