Hyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit, and this years sales are expected to be 20,000 units.

a. Suppose that if Hyperion drops the price to $300 immediately, it can increase this years sales by 25% to 25,000 units. What would be the incremental impact on this years EBIT of such a price drop?

b. Suppose that for each printer sold, Hyperion expects additional sales of $75 per year on ink cartridges for the next three years, and Hyperion has a gross profit margin of 70% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this year?