Question
Honda Motor Company is considering offering a $ 2 comma 000 rebate on its minivan, lowering the vehicle's price from $ 29 comma 300 to
Honda Motor Company is considering offering a
$ 2 comma 000
rebate on its minivan, lowering the vehicle's price from
$ 29 comma 300
to
$ 27 comma 300
.
The marketing group estimates that this rebate will increase sales over the next year from
41 comma 500
to
56 comma 500
vehicles. Suppose Honda's profit margin with the rebate is
$ 5 comma 820
per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits.
The cost of the rebate will be
$nothing
million. (Round to one decimal place.)
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