If The Price Needs To Be Adjusted What S The Lowest The Product Could Be Offered (1)
If the price needs to be adjusted, what’s the lowest the product could be offered and still have a positive NPV (keeping all other assumptions the same)
Marketing study $100,000
New PDA cost $200,000
Fixed Cost $2.1 million
Estimated sales per year:
Year 1 – $75,000
Year 2 – $85,000
Year 3 – $80,000
Year 4 – $70,000
Year 5 – $65,000
Unit price of new product $240
Equipment $10.5 million
Value of equipment in 5 years – $1.1 million
Networking Capital 22% No initial outlay for NWC
Corporate tax 30%
Required return 10%