6. Hyperion, Inc., currently sells its latest high-speed color printer, the Hyper 500, for $280. It plans
Question:
6. Hyperion, Inc., currently sells its latest high-speed color printer, the Hyper 500, for $280. It plans to lower the price to $230 next year. Its cost of goods sold for the Hyper 500 is $180 per unit, and this year's sales are expected to be 25,000 units.
a. Suppose that if Hyperion drops the price to $230 immediately, it can increase this year's sales by 30% to 32,500 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 $85 per year on ink cartridges for the next three years, and Hyperion has a gross profit margin of 80% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this year?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9781292018409
3rd Global Edition
Authors: Berk, Peter DeMarzo, Jarrad Harford