1)The Lonely Island has decided to move on from the music business. They want to start selling an energy drink to make you run faster and jump higher, and it will come in a heavy duty bottle in case someone throws it on the ground. They intially invest $3,800,000 into initial product R&D and will need to pay $45,000 per year for product quality and maintenance which they expect to go up by 6% per year due to pending inflation . Andy Samberg's genius business plan is to sell this drink for 8 years and aims to see returns of 18%. If each bottle has a gross margin of $1.31, approximately how many bottles do they need to sel every yearl to breakeven?

A. 226,667

B. 454,336

C. 688,321

D. 751,831

2)

Avatar fans are feeling that Apple's AirPods disproportionately represent one of the four elements, so Apple is releasing special edition WaterPods, EarthPods, and FirePods at the end of January 2022. Apple will make an upfront investment of $13,300,000 into this. - There will be ongoing monthly operating costs of $460,000 starting in February 2022 - Apple expects monthly income of $610,000 starting 2 months after the headphones drop (March 31, 2022). Income is expected to increase by 4% every month for a year (through March 31, 2023) and hold steady for the remainder of the project - Costs and income are at the end of the month every month (1/31, 2/28, etc.) You want to evaluate this project for Apple. If the intial investment for the fan-inspired headphones project is made on January 31, 2022 and the project goes until July 31, 2025, what is the rate of return for this project? What is your rationale for recommending it?

RATE

Rationale

A. 12.9%

A. Recommend, it is a high rate compared to the stock market

B. 16.8%

B. Dont recommend, it is lower than recent Apple stock gains

C. 21.4%

C. Can't evaluate this because we don't know the company MARR

D. 32.4%

D. Recommend, the company sees Avatar fans as a future growth segment