Business

FinanceQ&A LibraryHyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit, and thi year's sales are expected to be 20,000 units.a) Suppose that if Hyperion drops the price to $300 immediatley, it can increase this year's sales by 25% to 25,000 units. What would be the incremental impact on this eyar's EBIT of such a price drop?b) Suppose that for each printer sold, Hyperion expects additional sales of $75 per year on ink cartridges for the next years, and Hyperion has a gross profit margin of 70% on ink cartridges. What is the incremntal impact on EBIT for the next three years of a priced drop this year?Start your trial now! First week only $4.99!*arrow_forward*

Question

Hyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit, and thi year's sales are expected to be 20,000 units.

a) Suppose that if Hyperion drops the price to $300 immediatley, it can increase this year's sales by 25% to 25,000 units. What would be the incremental impact on this eyar's EBIT of such a price drop?

b) Suppose that for each printer sold, Hyperion expects additional sales of $75 per year on ink cartridges for the next years, and Hyperion has a gross profit margin of 70% on ink cartridges. What is the incremntal impact on EBIT for the next three years of a priced drop this year?

1 Rating

Tagged in

Business

Finance

Find answers to questions asked by students like you.

Q: What is the value of a 30-year annuity that pays $2500 a year? The annuity’s first payment will be r...

A: As a fist step, let's shifts ourselves to the end of t = 10 years.Annuity, A = $ 2,500; n = number ...

Q: Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: ...

A: Break-even point It is the number of sales units at which a company can cover its costs (fixed and v...

Q: a.If US$1 = C$1.1277, and if the bank in Canada charges 0.9% commission to buy or sell currencies, h...

A: You have posted many unrelated questions. I will address first three of them. Please post the blance...

Q: Gunter Company has income of $200,000, earnings per share of $2.00, common equity of $2,000,000, and...

A: Given information can be summarized as:Net income = NI = $200,000earnings per share, EPS = $2.00Book...

Q: A bank's loan rate for a machine is 9%. Determine the effective rate on the basis of the compounding...

A: The effective interest rate or the effective annual rate (EAR) is the actual rate paid or earned on ...

Q: Let C be the price of a call option that enables its holder to buy one share of a stock at an exerci...

A: Given that, K is the exercise price, S is stock price at time 0.

Q: Insigne Corporation is considering two investment projects (projects A and project B) that are mutua...

A: We have the following data regarding outflows and inflows for the two projects:

Q: Suppose a family has a gross annual income of $43,200. a. What is the maximum amount the family sh...

A: Most financial advisors recommend that one limit his mortagage payment to 28% of the monthly income ...

Q: Case Study #3: Chapter 6 Business Analysis A business can be valued by capitalizing its earnings st...

A: A business can be valued by capitalizing its earnings stream. In fact, the valuation of any asset or...

Q: Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: ...

A: Calculating the anticipated return after financing costs with the most aggressive asset financing mi...

Q: Larry’s Tire Company Inc. has earnings of $9 million with 2,100,000 shares outstanding before a publ...

A: Calculating the value of earnings per share before the offerings. We have,Earnings per share (EPS) =...

Q: Heidi owns 680 shares of Boyd Enterprises, which is priced at $65.44 per share. The company plans a ...

A: Number of stocks prior to stock split, Npre = 680Proposed stock split: 6 for 5 that is a shareholder...

Q: Multinational corporations are exposed to higher risks that primarily come from two significant sour...

A: Expropriation is the act in which taking over of privately owned property by the government.While, ...

Q: Case Study #1: Chapter 4 Business Analysis Ed Perez has always wanted to run his own restaurant. H...

A: (a) Joe is insisting Ed to prepare a business plan because the bank is concerned about getting their...

Q: Assume that the agreed-upon price is $90,000. What is the expected profiton the contract assuming th...

A: In the earlier part, the marginal cost for hospital 4 was calculated as $ 71,468 Marginal cost / pat...

Q: 1. Multinational corporations Why do companies go global? Multinational corporations operate in loca...

A: The best describe reason for Saltwater Corp is “to seek production efficiency”.Justification: The co...

Q: Your oldest daughter is about to start kindergarten in a private school. Tuition is $10,000 per yea...

A: Calculation of Present Value:There are 2 issues with the annuity. The one with the current tuition f...

Q: Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (...

A: Note:We shall answer the first question since the exact one wasn’t specified. Please submit a new qu...

Q: You are considering an investment in a clothes distributer. The company needs $105,000 today and exp...

A: Initial Cash outflow = C0 = $ 105,000; Cash inflow next year = C1 = $ 120,000If R is the IRR then, N...

Q: I posted the question below earlier today, and got an answer that pretty much matched what I had don...

A: While calculating the risk neutral price, we consider the risk neutral probabilities (probability of...

Q: You bought a home for $150,000 and put down 10% and got a mortagage at an interest rate of 4.35% per...

A: We will make use of the PMT function in Microsoft Excel to determine the monthly payment on the mort...

Q: Your company has been approached to bid on a contract to sell 21,000 voice recognition (VR) computer...

A: As per the details provided in the question, following are the required calculation where selling pr...

Q: Find the following values for a lump sum assuming annual compounding: The future value of $500 inve...

A: Before we get into the solution, let's understand two reciprocal concepts:If present value (PV) is k...

Q: At the end of each quarter-year, for 6 years, $1,200 is deposited into an investment paying 3.4% int...

A: At the end of each quarter-year, for 6 years, $1,200 is deposited into an investment paying 3.4% int...

Q: a-d. How do I calculate profit, revenue and cost variances and how are they related?

A: Since the question has four sub parts, only first three of them have been answered. Please post the ...

Q: A retail coffee company is planning to open 90 new coffee outlets that are expected to generate $15....

A: Expected cash flows at the end of year 1, C1 = $ 15.6 mnGrowth rate in the cash flows, g = 3.4% in p...

Q: Multinational companies are exposed to complex management and allocation of their resources. A multi...

A: Question 1:Calculate the change in the dollar value of inventory:

Q: I got an answer of 6.2% for this question, Can you confirm or deny my answer? R.S. Green has 250,000...

A: The final answer is 6.16% that can be rounded off to 6.2%. Hence, your answer is correct.Let's assig...

Q: Compute internal rate of return (IRR), payback period, and profitability index (PI) for each project...

A: Calculate free cashflows as shown:

Q: Can you help me solve this step by step. Thank you

A: Please see the white board.

Q: Deb and Rusty have just gotten married and wish to buy a home. They both work in Boston and have a c...

A: Let the largest amount they can use for a down payment be $ A.Cost of the house, C = $ 350,000Hence...

Q: Your firm has a risk-free investment opportunity where it can invest $160,000 today and receive $170...

A: Calculation of Interest Rate of the Project:The Interest Rate of the Project can be calculated using...

Q: Here are the percentage returns on two stocks. Digital Executive Month Cheese Fruit January February...

A: Variance:Variance is a valuation of difference in each stock from the mean of stocks. It shows how a...

Q: Money is deposited at the end of each week into an investment paying 2.6% interest compounded weekly...

A: Calculating the rent of the increasing annuity. We have,Rent of increasing annuity = [r / (1+r)n – 1...

Q: AJ’s Market generally holds $50,000 in cash in case an unexpected investment opportunity arises. Thi...

A: AJ’s Market generally holds $50,000 in cash in case an unexpected investment opportunity arises. Thi...

Q: Assume a security follows a geometric Brownian motion with volatility parameter sigma=0.2. Assume t...

A: Given that: The initial price=$25Interest rate is 0%Strike price is $22. volatility parameter sigma ...

Q: What finances do you need to have to achieve getting somewhere with Cosmetology? For instance to bu...

A: Some essential costs that are needed to be assessed before building a salon are:Cosmetics: A salon h...

Q: 51.Dr. Patriot has been working on an advanced ballistic missile technology for the U.S. military. T...

A: As per the question, the technology will generate $2,000,000 seven years from now and will grow at 2...

Q: Belotti Company just paid a dividend of $1.67 per share to its stockholders. Market analysts believe...

A: Calculation of Required Return:

Q: You just won the lottery. You and your heirs will receive $40,000 per year forever, beginning 10 yea...

A: PV today, of a perpetuity starting a year from now is given by = P / r where P = perptuity amount an...

Q: Consider an uneven cash flow stream: Year Cash Flow 0 $2,000 1 $2,000 2 $0 3 $1,500 4 $...

A: Before we get into the solution, let's understand two reciprocal concepts:If present value (PV) is k...

Q: Three years ago, you founded Outdoor Recreation, Inc., a retailer specializing in the sale of equipm...

A: All financials re in $ mn. Number of shares are in mn. Share price, earnings per share are in $.Fore...

Q: Book Value versus Market Value Dinklage Corp. has 8 million shares of common stock outstanding. The ...

A: Equity Details:Dinklage Corp. has Ns = 8 million shares of common stock outstanding.The current shar...

Q: A firm has the following total avenue and total cost schedules TR=$2Q TC=$4,000 +$1.5Q a. what is th...

A: TR=$2QTC=$4,000 +$1.5Qa. what is the break- even level of output? what is the level of profit at sal...

Q: Bethesda Mining is a midsized coal mining company with 20 mines located in Ohio, Pennsylvania, West ...

A: Given, Value of land is $6,500,000.Equipment cost is $95,000,000.Equipment life is 7 years.Equipment...

Q: A stock has a beta of 1.14 and an expected return of 10.5 percent. A risk-free asset currently earns...

A: Calculating the expected return on a portfolio that is equally invested in the two assets. We have,E...

Q: What is the yield to maturity for a seven-year bond that pays 11% interest on a $1000 face value sem...

A: Calculation of yield to maturity (YTM): Excel spread sheet:

Q: Here are some historical data on the risk characteristics of Ford and Harley Davidson. Harley Davids...

A: Since you have asked a question with five sub parts, I will address the first three sub parts. Pleas...

Q: What is the future value in 12 years of $1,000 payments received at the beginning of each year for t...

A: As a first step, let's gather all the information that question has to offer.Annuity investment = A ...

Q: Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: ...

A: Sale Price per bag, SP = $ 20 / bag; Variable cost per bag, VC = variable cost per pound x no. of p...