Hyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $356. It plans to lower the price to $308 next year. Its cost of goods sold for the Hyper 500 is $192 per unit, and this year’s sales are expected to be 22,500 units.

a. Suppose that if Hyperion drops the price to $308 immediately, it can increase this year’s sales by 26%

to 28,350 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 $89 per year on ink cartridges for the next three years, and Hyperion has a gross profit margin of 71% on ink cartridges.

What is the incremental impact on EBIT for the next three years of a price drop this year?