Question
Boulangerie Bouffard expects to start new product of frenchcroissants next year for $1.25 each. Variable cost of a croissant is $0.75. Fixed costs are $150,000,
Boulangerie Bouffard expects to start new product of frenchcroissants next year for $1.25 each. Variable cost of a croissant is $0.75. Fixed costs are $150,000, depreciation $200,000 and the tax rate is 25%. It is estimated the new product demand lasts for 5 years. Thefinancial manager estimates that it could sell around 750 thousand to 1 million croissants, depending upon the economic condition. The forecast by next year is there is a probability of economy dowturn is 30%, and economy rise up is 70%. Should Boulangerie Bouffardproceed with the new product?
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