Which factor could make funding expansion worthwhile for ABC?

Which factor could make funding expansion worthwhile for ABC?

• A. Rising demand for recycled materials
• B. Increasing gold prices
• C. Stable regulatory environment
• D. Diminishing e-waste supply

Answer: (A)

When the market for what a business sells is growing, expanding capacity tends to be worthwhile because higher demand means more sales and better use of fixed costs. A rise in demand for recycled materials suggests customers are buying more of ABC’s product, which can lead to higher revenue and improved profitability for the new, larger operation. With sales increasing, the investment is more likely to pay back quickly and yield a solid return, making funding expansion more attractive. The other factors don’t align as directly with the decision. A rise in gold prices would matter if ABC’s activities are tied to gold, but it’s not the main driver for expanding a recycling operation. A stable regulatory environment reduces risk but does not by itself boost expected profits, and a diminishing supply of e-waste would reduce future opportunities rather than support expansion.

When the market for what a business sells is growing, expanding capacity tends to be worthwhile because higher demand means more sales and better use of fixed costs. A rise in demand for recycled materials suggests customers are buying more of ABC’s product, which can lead to higher revenue and improved profitability for the new, larger operation. With sales increasing, the investment is more likely to pay back quickly and yield a solid return, making funding expansion more attractive.

The other factors don’t align as directly with the decision. A rise in gold prices would matter if ABC’s activities are tied to gold, but it’s not the main driver for expanding a recycling operation. A stable regulatory environment reduces risk but does not by itself boost expected profits, and a diminishing supply of e-waste would reduce future opportunities rather than support expansion.