Question
Wishfullthinking Luxury Yachts, Inc., is considering introducing a new line of budget yachts for the only slightly mega-wealthy. This new budget yacht would sell for
Wishfullthinking Luxury Yachts, Inc., is considering introducing a new line of budget yachts for the only slightly mega-wealthy. This new budget yacht would sell for $1 million each. The company believes it will be able to sell 1,000 of these ships globally per year. They also believe that the positive publicity generated at country clubs around the world by this new line of yacht will increase sales of its mid-sized yacht, which sell for $2 million each, by 100 units per year. However, as their clients become more budget minded, the new line of yacht will erode sales of their luxury ocean liner, which sells for $10 million; sales of the luxury liner are expected to decline by 25 units per year. What is the annual sales amount that should be used in analyzing whether the new budget yachts should be introduced?
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