Sleek Watch Corp. currently sells 15,900 Signature watches per year at $2,800 each and 5,250 Luxury...

 

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Sleek Watch Corp. currently sells 15,900 Signature watches per year at $2,800 each and 5,250 Luxury Prestige watches per year at $12,000 each. The company wants to introduce a new mid-grade watch (the Limited) to fill out its product line. Sleek Watch anticipates that they could sell 11,200 of these new mid-grade Limited watches each year at a price of $5,400 each. An independent consultant has determined that if the company introduces the new Limited watch, it will also result in a reduction in the sales of its existing Signature watches by 1,900 units per year, but there would be no change to the sales of the Luxury Prestige watches. When calculating annual operating cash flows for this project, what is the appropriate amount to use in the analysis as the annual net revenue change for evaluating this project (calculate ONLY the relevant change in revenue, not the entire annual operating cash flow)? Sleek Watch Corp. currently sells 15,900 Signature watches per year at $2,800 each and 5,250 Luxury Prestige watches per year at $12,000 each. The company wants to introduce a new mid-grade watch (the Limited) to fill out its product line. Sleek Watch anticipates that they could sell 11,200 of these new mid-grade Limited watches each year at a price of $5,400 each. An independent consultant has determined that if the company introduces the new Limited watch, it will also result in a reduction in the sales of its existing Signature watches by 1,900 units per year, but there would be no change to the sales of the Luxury Prestige watches. When calculating annual operating cash flows for this project, what is the appropriate amount to use in the analysis as the annual net revenue change for evaluating this project (calculate ONLY the relevant change in revenue, not the entire annual operating cash flow)?

Answer rating: 100% (QA)

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