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Apple has been selling 44,200 iMacs per year at a price of $3,450 and an operating margin of 79% (ie what fraction of revenue is
Apple has been selling 44,200 iMacs per year at a price of $3,450 and an operating margin of 79% (ie what fraction of revenue is lett after deducting COGS and depreciation) for years and expects to continue doing so. Next year. Apple will introduce the new model replacing the current model completely. The price will be 5% lower increasing sales by 6, 700 units and lowering operating margin to 64% for all future years. What is the incremental impact on EBIT from year 1 onwards that is due to this price change in million)? Apple designed the new model in such a way that customers who buy the new model in one year can be expected to contribute $242 in extra but in the form of software and hardware upgrades per unit for each of the 3 subsequent years. The old model effected no such add-on purchases. What will be the effect on year 2 EBIT that is due to the add-on sales alone? $ m Under these additional assumptions, enter the combined incremental changes to overall EBIT in years 2. 3 and 4 below. The incremental change in EBIT in year 2 is $ m The incremental change in EBIT in year 3 is $ m The incremental change in EBIT in year 4 is
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