A chip company is planning to launch a new product, but their demand planning team is having a hard time determining how much they should produce due to recent inconsistency of trends in the snack market. There are 3 launch scenarios below that include initial investment in tooling and other product costs, marketing costs, and projected profits. If the company MARR is 17% and there is a project life of 8 years, which of the launch plans would you recommend? Plan A: Initial investment in tooling and other product-related costs: $9,000,000 No marketing campaign Annual revenue of $3,040,000 Plan B: Initial investment in tooling and other product-related costs: $12,000,000 Spend $1,400,000 on marketing campaign annually Annual revenue of $4,900,000 increasing by 1.7% annually Plan C: Initial investment in tooling and other product-related costs: $12,500,000 Spend $1,700,000 on marketing campaign annually One-time endorsement by Steph Curry in year 3, will cost $1,050,000 Annual revenue of $5,550,000 increasing by 1.2% annually Plan D-None of the Above as they all will cost too much money and are not viable

A chip company is planning to launch a new product, but their demand planning team is having a hard time determining how much they should produce due to recent inconsistency of trends in the snack market. There are 3 launch scenarios below that include initial investment in tooling and other product costs, marketing costs, and projected profits. If the company MARR is 17% and there is a project life of 8 years, which of the launch plans would you recommend? Plan A: Initial investment in tooling and other product-related costs: $9,000,000 No marketing campaign Annual revenue of $3,040,000 Plan B: Initial investment in tooling and other product-related costs: $12,000,000 Spend $1,400,000 on marketing campaign annually Annual revenue of $4,900,000 increasing by 1.7% annually Plan C: Initial investment in tooling and other product-related costs: $12,500,000 Spend $1,700,000 on marketing campaign annually One-time endorsement by Steph Curry in year 3, will cost $1,050,000 Annual revenue of $5,550,000 increasing by 1.2% annually Plan D-None of the Above as they all will cost too much money and are not viable

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 1eM

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