Suppose you own a company that makes fishing poles. Business is good with annual revenue of $1
Question:
Suppose you own a company that makes fishing poles. Business is good with annual revenue of $1 million and profits of $100,000. One day a bright young employee comes to you and says he has developed a better fishing pole that will increase profits by 50% a year. You test the new pole and are convinced the pole is superior. However, you estimate it will require an investment of $200,000 in new machinery and equipment, marketing, etc., to start producing the new pole. You figure it will take a year before the new fishing pole is selling 50% more than the old fishing pole. Should you take the gamble? Create a graph to demonstrate the costs and benefits. What is the minimum annual return you require to invest in this new fishing pole?
Financial and managerial accounting
ISBN: 978-1118016114
1st edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso