Question
Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds.
Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds. (Refer to the TQM Initiative worksheet in the CompXM.xls Decisions menu.) Looking at the Round 0 Inquirer for Andrews, last year's sales were $163,085,264. Assuming similar sales next year, the 1.7% increase in demand will provide $2,772,449 of additional revenue. With the overall contribution margin of 34.1%, after direct costs this revenue will add $945,405 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $2,000,000 TQM investment, rounded to the nearest month?
1) 17 months
2) 9 months
3) TQM investment will not have a significant financial impact
4) 25 months
Step by Step Solution
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The incremental cash flow over the next year is 2772449 The investment is ...Get Instant Access to Expert-Tailored Solutions
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