1 2 3 4 Revenues   500 515 536 402 COGS   300 306 314 262 Gross Profit   200 209 222 140 SG&A   70 72 74 74 Depreciation   30 30 30 30 Operating Income 100 107 118 36 EBITDA    130 137 148 66 Debt       300 300                         In year 1, $100 of COGS were fixed.       2.  Now assume the largest risk to this customer is rising costs that           cannot be passed along to the customers.  Specifically, assume that the variable      component of COGS rises in price by 30% in year 4.  Project revenue, COGS        and EBITDA in year 4.  Calculate Debt/EBITDA and interest coverage in year 4

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Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.