PepsiCo has introduced a new product line which will require a capital investment of $12.5M. The funds will purchase the necessary operating equipment, construction, and cover start up costs. The product has already been test marketed by R&D and has been well received. Initial line use is rated for 60% of rated capacity. Line capacity is 503,700,000 units annually. Units sell for $1 each. Fixed costs are 14% and variable costs are 80%.
Describe the risks associated with the introduction of the new product and the financial impact that these risks may have.
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