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You are now the Chief Marketing Officer (CMO) of Louis Vuitton Handbags. WOW! See how taking this class has gotten you such a GREAT JOB!*

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You are now the Chief Marketing Officer (CMO) of Louis Vuitton Handbags. WOW! See how taking this class has gotten you such a GREAT JOB!* You are in-charge of launching 3 BRAND-NEW handbags for the upcoming season.* The bags are: 1. New Wave Chain Bag: $2,880 Cost of Goods Sold (COGS): 45%- Initial Production Set-Up Cost: $0 (Uses same production set-up as previous year's model) 3-Year Ad Schedule: 1) $5,000,000, 2) 25% less than prior year, 3) 25% less than prior year- Expected 3-Year Sales (in units): 1) 60,000, 2) 0.01 units for each $1 in advertising spent in the prior year, 3) 0.01 units for each $1 in advertising spent in the prior year. 4 4 2. Bleeker Box - $3,150. Cost of Goods Sold (COGS): 55%+' Initial Production Set-Up Cost: $10,000,000 3-Year Ad Schedule: 1) $10,000,000, 2) 25% less than prior year, 3) 25% less than prior year. Expected 3-Year Sales (in units): 1) 100,000, 2) 0.0075 units for each $1 in advertising spent in the prior year, 3) 0.0025 units for each $1 in advertising spent in the prior year. 3. Lock Me Ever Bag - $3,200 Cost of Goods Sold (COGS): 50% Initial Production Set-Up Cost: $2,500,000. 3-Year Ad Schedule: 1) $7,500,000, 2) 25% less than prior year, 3) 25% less than prior year Expected 3-Year Sales (in units): 1) 75,000, 2) 0.005 units for each $1 in advertising spent in the prior year, 3) 0.005 units for each $1 in advertising spent in the prior year." QUESTION Rank the three handbags based on ROI, 1st, 2nd and 3rd. Use a 3-year time frame and a 12% cost of capital for the NPV

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