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chap008 - Chapter 8 Strategy and Analysis in Using Net...

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2 * Chapter 8: Strategy and Analysis in Using Net Present Value 8.1 Go directly: NPV = 0.5 × $20 million + 0.5 × $5 million = $12.5 million Test marketing: NPV = -$2 million + (0.75 × $20 million + 0.25 × $5 million) / 1.15 = $12.13 million Go directly to the market. 8.2 Focus group: -$120,000 + 0.70 × $1,200,000 = $720,000 Consulting firm: -$400,000 + 0.90 × $1,200,000 = $680,000 Direct marketing: 0.50 × $1,200,000 = $600,000 The manager should conduct a focus group. 8.3 Price more aggressively: -$1,300,000 + (0.55 × 0) + 0.45 × (-$550,000) = -$1,547,500 Hire lobbyist: -$800,000 + (0.75 × 0) + 0.25 × (-$2,000,000) = -$1,300,000 Tandem should hire the lobbyist. 8.4 Let sales price be x. Depreciation = $600,000 / 5 = $120,000 BEP: ($900,000 + $120,000) / (x - $15) = 20,000 x = $66 8.5 The accounting break-even = (120,000 + 20,000) / (1,500 - 1,100) = 350 units 8.6 a. The accounting break-even = 340,000 / (2.00 - 0.72) = 265,625 abalones b. [($2.00 × 300,000) - (340,000 + 0.72 × 300,000)] (0.65) = $28,600 This is the after tax profit. 8.7 EAC = $140,000 / 7 15 . 0 Α = $33,650 Depreciation = $140,000 / 7 = $20,000 BEP = {$33,650 + $340,000 × 0.65 - $20,000 × 0.35} / {($2 - $0.72) × 0.65} = 297,656.25 297,657 units Answers to End-of-Chapter Problems B-91
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8.8 Depreciation = $200,000 / 5 = $40,000 EAC = $200,000 / 5 12 . 0 Α = $200,000 / 3.60478 = $55,482 BEP = {$55,482 + $350,000 × 0.75 - $40,000 × 0.25} / {($25 - $5) × 0.75} = 20,532.13 20533 units 8.9 Let I be the break-even purchase price. Incremental C 0 Sale of the old machine $20,000 Tax effect 3,400 Total $23,400 Depreciation per period = $45,000 / 15 = $3,000
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