1. A Black & Decker board member is outraged about the brand name change. Instead, he proposes that the company should increase its competitiveness by posting a 5% price cut. Assuming an average initial margin of 10%, what would be the required sales volume increase (in percent) in order to break even on such a price cut?

2. Another member of the board is also outraged about the name change. Instead she thinks Black & Decker should sell at a premium and argues for a price increase of 5%. Assuming the same 10% margin, what decrease in sales volume (in percent) would result in a breakeven on the price change?

3. Continuing with Black & Decker and assuming the same 10% margin on retail sales of power tools, consider that (1) an average professional craftsman customer pays about $3,000 per year on new power-tools, and (2) Black & Decker has a customer churn rate of 20% per year. If we ignore time discounting, what is the maximum cost Black & Decker can spend in order to attract a new customer to its brand (so that the customer lifetime value is not negative)?