Tylenol Crisis 1982 . Projected Sales (before crisis) 1982: $500,000,000 Actual Sales of 1982: $250,000,000 Tylenol has a choice to recall ALL product from all stores or leave them on the shelves They also had to decide whether they make a public statement or not. If they recalled the product (000s) Immediate Cost of Recall Product: $200,000 Immediate Cost of Recall Labor: $150,000 Immediate Cost of Recall PR: $100,000 Increased Adverting Cost in 1983 and 1984: $50,000 Increased Adverting Cost in 1985: $25,000 Discount Couponing in 1983, 1984 & 1985: 25% Sales in 1983: 10% increase on actual 1982 Sales Sales increase after 1983: 17% per year If they did nothing Sales in 1983: 60% decrease on actual 1982 Sales Sales increase after 1983: 10% per year . What should they do? Use NPV to decide with a 15% cost of capital Tylenol Crisis 1982 . Projected Sales (before crisis) 1982: $500,000,000 Actual Sales of 1982: $250,000,000 Tylenol has a choice to recall ALL product from all stores or leave them on the shelves They also had to decide whether they make a public statement or not. If they recalled the product (000s) Immediate Cost of Recall Product: $200,000 Immediate Cost of Recall Labor: $150,000 Immediate Cost of Recall PR: $100,000 Increased Adverting Cost in 1983 and 1984: $50,000 Increased Adverting Cost in 1985: $25,000 Discount Couponing in 1983, 1984 & 1985: 25% Sales in 1983: 10% increase on actual 1982 Sales Sales increase after 1983: 17% per year If they did nothing Sales in 1983: 60% decrease on actual 1982 Sales Sales increase after 1983: 10% per year . What should they do? Use NPV to decide with a 15% cost of capital