Honda Motor Company is considering offering a $1,900 rebate on its minivan, lowering the vehicle's price from $30,100 to $28,200. The marketing group estimates that this rebate will increase sales over the next year from 39,000 to 53,800 vehicles. Suppose Honda's profit margin with the rebate is $5,470 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) million. (Round to one decimal place.) The benefit of the rebate will be $ Is it a good idea? (Select from the drop-down menu.) Offering the rebate (1) (1) does not O does look attractive.

Honda Motor Company is considering offering a $1,900 rebate on its minivan, lowering the vehicle's price from $30,100 to $28,200. The marketing group estimates that this rebate will increase sales over the next year from 39,000 to 53,800 vehicles. Suppose Honda's profit margin with the rebate is $5,470 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) million. (Round to one decimal place.) The benefit of the rebate will be $ Is it a good idea? (Select from the drop-down menu.) Offering the rebate (1) (1) does not O does look attractive.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs

Section: Chapter Questions

Problem 1EP

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Honda Motor Company is considering offering a $1,800 rebate on its minivan, lowering the vehicle's price from $29,900 to $28,100. The marketing group estimates that this rebate will increase sales over the next year from 38,100 to 53,000 vehicles. Suppose Honda's profit margin with the rebate is $5,890 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $_____million. (Round to one decimal place.)
Honda Motor Company is considering offering a $2,100 rebate on its minivan, lowering the vehicle's price from $29,700 to $27,600. The marketing group estimates that this rebate will increase sales over the next year from 42,000 to 55,400 vehicles. Suppose Honda's profit margin with the rebate is $6,600 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits.
Good-Deal Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low downpayment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers. On January 1, 2020, a customer purchased a new $33,000 automobile, making a downpayment of $1,000. The customer signed a note indicating that the annual rate of interest would be 8% and that quarterly payments would be made over 3 years. For the first year, Good-Deal required a $400 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2021. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2023. Instructions a. Prepare a note amortization schedule for the first year. b. Indicate the amount the customer owes on the contract at the end of the first year. c. Compute the amount of the new…
Heavy Duty Company, a manufacturer of power tools, decides to offer a rebate of $130 on its 16-inch midrange chain saw, which currently has a retail price $490. Heavy Duty's marketers estimate that, as a result of the rebate, sales of this model will increase from 60,000 to 80,000 units next year. The profit margin for Heavy Duty before the rebate is $180. Based on the given information, is the decision to give the rebate a wise one? Explain
Good-Deal Auto developed a new sales gimmick to help sell its inventory of new automobiles.Because many new car buyers need financing, Good-Deal offered a low down payment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers.On January 1, 2019, a customer purchased a new €33,000 automobile, making a down payment of €1,000. The customer signed a note indicating that the annual rate of interest would be 8% and that quarterly payments would be made over 3 years. For the first year, Good-Deal required a €400 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2020. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1,2022.Instructionsa. Prepare a note amortization schedule for the first yearb. Indicate the amount the customer owes on the contract at the end of the first yearc. Compute the amount of the new quarterly…
Good-Deal Auto developed a new sales gimmick to help sell its inventory of new automobiles.Because many new car buyers need financing, Good-Deal offered a low down payment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers.On January 1, 2019, a customer purchased a new €33,000 automobile, making a down payment of €1,000. The customer signed a note indicating that the annual rate of interest would be 8% and that quarterly payments would be made over 3 years. For the first year, Good-Deal required a €400 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2020. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1,2022.Instructionsa. Prepare a note amortization schedule for the first yearc. Prepare a note amortization schedule for these new payments for the next 2 yearsd. What do you think of the new sales promotion used…
APQ Company currently sells a piece of equipment for $150 per unit. It plans on lowering the price of the unit to $119 per unit. The cost of goods for each unit is consistent each year, at $52 per unit. The company expects to sell 100,000 units in the current year. Suppose that if APQ drops the price on the equipment immediately, it can increase sales over the next year by 30% to 130,000 units. Will this price decrease have a positive or negative impact on the company's EBIT? What will be the dollar value of the incremental impact of this price drop on the firm's EBIT? Will this have a positive or negative impact on the EBIT for the company? What will the dollar value of the incremental impact of the price drop be for the company? (Enter a negative for a loss, positive for a gain; round your answer to the nearest whole dollar.)
An automobile manufacturer plans to spend $1 billion to improve the quality of a new model. The manufacturer expects the quality-improvement program to eliminate the need for recall and reduce the costs forother warranty repairs. The firm’s experience had been, on average, 1.5 recalls for each new model at acost of $300 per vehicle per recall. The average cost per recall, if one is needed, is expected to increase by10% for the new model. Costs for other warranty repairs are expected to decrease from $200 to $80 per unitsold. Sales of the new model were expected to be 500,000 units without the quality-improvement program.The company believes that the well-publicized quality-improvement program will increase total sales to650,000 units. If there is a profit of $5,000 per unit on any incremental sales attributable to the qualityimprovement program, is the $1 billion expenditure justified?
Kayla's Kayaks is also evaluating the extension of credit to a new customer, Ray's River Guides. Kayla estimates that this new customer would add $50,000 in additional credit sales, with 5% likely to be uncollectible. She estimates that she will incur $5,000 in additional collection expenses. Kayla's production and marketing costs represent 65% of her sales and the company is in the 30% tax bracket. She will not need any other asset buildup to service this new customer. Kayla's average collection period is 90 days and she has an 8% desired return. Should Kayla accept this new customer? Please provide her with the applicable calculations to back up your recommendation. Additionally, if you recommend that she accept this new customer, please explain the risks of doing so, specifically in terms of the percentage estimates she has given to you. If you recommend that she not accept this new customer, please give Kayla some ideas about what she could do to make this proposition more…
Hyperion, Inc. currently sells its latest high-speed colour printer, the Hyper 500, for $371. It plans to lower the price to $318 next year. Its cost of goods sold for the Hyper 500 is $212 per unit, and this year's sales are expected to be 21,000 units. a. Suppose that, if Hyperion drops the price to $318 immediately, it can increase this year's sales by 27% to 26,670 units. What would be the incremental impact on this year's EBIT of such a price drop? b. Suppose that, for each printer sold, Hyperion expects additional sales of $78 per year on ink cartridges for the three years, and Hyperion has a gross profit margin of 61% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this year?
1. What is the company's current breakeven in units and in dollars? 2. If the company expects to sell 260 premium garage doors in the upcoming year, and it does not develop the software control system, what is its expected operating income from premium garage doors? 3. If the software control system were to be developed and implemented, what would be the company's new breakeven point in units and in dollars? 4. If the company expects to sell 260 premium garage doors in the upcoming year, and it develops the software control system, what is its expected operating income from premium garage doors? 5. If the company expects to sell 260 premium garage doors in the upcoming year, do you think the company should implement the software control system? Why or why not? What factors should the company consider? pop-up content ends PrintDone
Pretty Feet Inc. developed a new sales gimmick to help sell its inventory of new automobiles.Because of many new car buyers need financing, Pretty Feet offered a low downpayment andlow car payments for the first year of purchase. It believes that this promotion will bring insome new buyers.On January 1, 2017, a customer purchased a new P25,000 automobile, making a downpaymentof P1,000. The customer signed a note indicating that the annual interest rate of interest wouldbe 8% and that quarterly payments would be made over 3 years. For the first year, Pretty Feetrequired a P300 quarterly payment to be made on April 1, July 1, October 1, and January 1,2018. After this one-year period, the customer was required to make regular quarterlypayments that would pay off the loan as of January 1, 2019.Required:(a) Prepare a note amortization schedule for the first year.(b) Indicate the amount the customer owes on the contract at the end of the first year.(c) Compute the amount of the new quarterly…