Question
In 2005 Apple Computers sales were $13,931,000,000, and the companys cost of goods sold was $9,888,000,000. Apple has been funding R&D on a highly secret
In 2005 Apple Computers sales were $13,931,000,000, and the companys cost of goods sold was $9,888,000,000. Apple has been funding R&D on a highly secret new product, thought to rival the iphone in its potential, to the tune of $534,000,000 last year. The new product is expected to have a four year life cycle. It is expected that upfront costs of setting up the manufacturing and operating the marketing campaign for the launch will be $750,000,000. Variable cost per unit is expected to be $72.88, and recent market research showed the price should be $90. Assuming sales volume of 50,000,000 units total, and if the new product is expected to cannibalize 25% of Apples current sales dollars, should Apple go ahead with the new product launch? Select one: a. Yes, because otherwise the R&D for the project will be wasted. b. Yes because breakeven volume is less than expected sales volume. c. -$1,010,694,050 d. No, because the net contribution will be reduced. e. No, because the project will not break even.
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