Question
Hyperion, Inc., currently sells its latest high-speed color printer, the Hyper 500, for $349. It plans to lower the price to $300 next year. Its
Hyperion, Inc., currently sells its latest high-speed color printer, the Hyper 500, for $349. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $192 per unit, and this years sales are expected to be 26,100 units. a. Suppose that if Hyperion drops the price to $300 immediately, it can increase this years sales by 30% to 33,930 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 $89 per year on ink cartridges for the next three years, and Hyperion has a gross profit margin of 65% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this year?
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