Heiko Company, a manufacturer of moderately priced timepieces, would like to introduce a new electronic watch. To compete effectively, Heiko cannot price the watch at more than €30. The company requires a return on investment of 15% on all new products. The plan is to produce and sell 20,000 watches each year. This would require a €500,000 investment. What is the target cost per watch? a) €26.25 b) €28.00 c) €29.50 d) €30.00
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Heiko Company, a manufacturer of moderately priced timepieces, would like to introduce a new electronic watch. To compete effectively, Heiko cannot price the watch at more than €30. The company requires a return on investment of 15% on all new products. The plan is to produce and sell 20,000 watches each year. This would require a €500,000 investment. What is the target cost per watch?
a) €26.25
b) €28.00
c) €29.50
d) €30.00
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- Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $34.8 million. If the DVDR fails, the present value of the payoff is $12.8 million. If the product goes directly to market, there is a 40 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.38 million to test market the DVDR. Test marketing would allow the firm to improve the product and increase the probability of success to 70 percent. The appropriate discount rate is 12 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market.Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $24 million. If the DVDR fails, the present value of the payoff is $8.5 million. If the product goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.2 million to test market the DVDR. Test marketing would allow the firm to improve the product and increase the probability of success to 80 percent. The appropriate discount rate is 11 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Should the firm conduct test marketing? multiple choice No YesKeener Clothiers Inc. is considering investing $2 million in an automatic sewing machine to produce a newly designed line of dresses. The dresses will be priced at $200, and management expects to sell 12,000 per year for six years. There is, however, some uncertainty about production costs associated with the new machine. The production department has estimated operating costs at 70% of revenues, but senior management realizes that this figure could turn out to be as low as 65% or as high as 75%. The new machine will be depreciated at a rate of $200,000 per year for six years (straight line, zero salvage). Keener’s cost of capital is 14% and its marginal tax rate is 35%. Calculate a point estimate along with best and worst case scenarios for the project’s NPV.
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