Honda Motor Company is considering offering a $1,000 rebate on its minivan, lowering the vehicle's price from $31,000 to $30,000. The marketing group imates that this rebate will increase sales over the next year from 25,000 to 29,000 vehicles. Suppose Honda's profit margin with the rebels is 15.000 per vehide What will be the benefit of the rebate? OA. $24 million OB. $25 million OC. $5 million OD. $20 million

Honda Motor Company is considering offering a $1,000 rebate on its minivan, lowering the vehicle's price from $31,000 to $30,000. The marketing group imates that this rebate will increase sales over the next year from 25,000 to 29,000 vehicles. Suppose Honda's profit margin with the rebels is 15.000 per vehide What will be the benefit of the rebate? OA. $24 million OB. $25 million OC. $5 million OD. $20 million

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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Honda Motor Company is considering offering a $2,100 rebate on its minivan, lowering the vehicle's price from $30,900 to $28,800. The marketing group estimates that this rebate will increase sales over the next year from 39,100 to 56,800 vehicles. Suppose Honda's profit margin with the rebate is $5,090 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.)
1 A travel company is considering obtaining a new boat for tours. It is expected to cost 3,000,000, have a useful life of three years, and sold for 2,000,000 at that time. It will fall into a 25% CCA rate, the firm's tax rate is 40% and its cost of capital is 14%. The boat builder is offering a lease (rent) alternative. What is the most the travel company would be willing to pay at the end of each of the three years, before tax, if it decided to lease the boat? The boat will be returned to the leasing company at that time. (You are calculating the pre-tax lease payment amount. Hint, calculate the net cost of ownership as a starting point). a. 586,111 b. 976,851 c. 289,323 d. 1,000,000
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