5) Istanbul Company manufactures product A and is thinking reducing the price by 50 TL per unit for the coming year. If the priceis reduced, demand is expected to increase by 6,000 units. If the price is reduced, operating profit will:DemandSelling priceIncremental cost per unitA) increase by 800,000 TLB) decrease by 800,000 TLC) increase by 1,200,000 TLD) decrease by 1,400,000 TLE) increase by 1,000,000 TLCurrently40,000 units450300Projected46,000 units400300

Lets understand the basics.Operating profit is profit earned after deducting all cost of…

Answered: 5) Istanbul Company manufactures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Jordan Corporation is considering a new product that will be very popular for a couple of years and then slowly lose its commercial appeal. Sales are projected to be $90,000 in year one, $100,000 in year two, $60,000 in year three, $40,000 in year four, $20,000 in year five, and $10,000 in the final year six. Expenses are expected to be 40% of sales with net working capital requirements to be 15% of the following time period’s revenue. Equipment of $126,000 will be required for the launch of the product; this equipment can be depreciated straight-line over six years and will be worthless at the end of the project. The Tax Rate is 20% and the opportunity cost of capital is 14.5%. What is the Internal Rate of Return (rounded to two places)? Multiple Choice 32.61% None of the above 13.39% 18.32% 19.46%
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Assume the company expects to sell 5 million packages ofPop-Tarts Gone Nutty! in the first year after introductionglobally, but expects that 80 per cent of those sales willcome from buyers who would normally purchase existingPop-Tart flavours (that is, they will be cannibalised sales).Assuming the sales of regular Pop-Tarts are normally 300million packs per year and that the company will incur anincrease in fixed costs of €500,000 during the first year tolaunch Gone Nutty!, will the new product be profitable for the company? Refer to the discussion of cannibalisa-tion in Appendix 2: Marketing by the Numbers for an ex-planation regarding how to conduct the analysis
If the Rhine Company ignores the possibility that other firms may enter its market, it should set a price of $10,000 for its product, which is a power tool. But if it does so, other firms will begin to enter the market. During the next two years it will earn $4 million per year, but in the following two years it will earn $1 million per year. On the other hand, if it sets a price of $7,000, it will earn $2.5 million in each of the next four years because no entrants will appear. If the interest rate is 8 percent, should the Rhine Company set a price of $7,000 or $10,000? a. NPV $10.0M for $7,000 price b. NPV $10.0M for $10,000 price c. NPV $7.3M for $7,000 price d. NPV $8.7M for $10,000 price

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