6. (Textbook 13.3) A company is considering whether or not to go ahead with a project....
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6. (Textbook 13.3) A company is considering whether or not to go ahead with a project. They expect their investment cost to be about $10 million, annual revenues to be about $2 million, and annual operating costs to be about $0.5 million. Hence, they expect their annual profit to be about $1.5 million and their annual return on investment to be about 15%. Remember that ROI = (Revenue-Cost) / Investment. However, there is uncertainty in all of these numbers, as suggested in the following table. Expected Variability in Investment, Revenue, and Operating Cost -20% -10% +20% +30% 10% 0% 15% 5% 20% Investment cost 0% 10% 10% Revenue Operating cost Original +10% 10% 15% 15% 75% 50% 40% 5% 5% 15% How likely are they to achieve at least a 15% ROI? To answer this question, use example 13.2 and section 13.2.1 as guides. 6. (Textbook 13.3) A company is considering whether or not to go ahead with a project. They expect their investment cost to be about $10 million, annual revenues to be about $2 million, and annual operating costs to be about $0.5 million. Hence, they expect their annual profit to be about $1.5 million and their annual return on investment to be about 15%. Remember that ROI = (Revenue-Cost) / Investment. However, there is uncertainty in all of these numbers, as suggested in the following table. Expected Variability in Investment, Revenue, and Operating Cost -20% -10% +20% +30% 10% 0% 15% 5% 20% Investment cost 0% 10% 10% Revenue Operating cost Original +10% 10% 15% 15% 75% 50% 40% 5% 5% 15% How likely are they to achieve at least a 15% ROI? To answer this question, use example 13.2 and section 13.2.1 as guides.
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Pricing Strategies A Marketing approach
ISBN: 978-1412964746
1st edition
Authors: Robert M. Schindler
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