Assume your best investment opportunity gets you 10% per year in the market. An alternative opportunity...

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Assume your best investment opportunity gets you 10% per year in the market. An alternative opportunity arises. You can enter the electric scooter market. Cost Structure: If you enter the market today (year zero), you have $480,000 as fixed costs and 4Q2+10Q as variable costs. All costs are due when the production starts. You will be in the short run for three years, that is, with the committed capital you will be able produce for three years. Sales: You will be able to sell 1/3 of the production at year 1(one year after the production starts), 1/3 of it at year 2, and the rest at year 3. Assume that price you can charge for your product stays at $8,000 throughout the production process. You don't have any money now but assume that you can borrow and lend money at 10% APR anytime you want. If you start the production a year from today (year 1), the sales description stays the same, that is, you can sell your product in three years following the start of production beginning one year after the production. However, you will have enough time to make necessary adjustments to have your variable costs go down by 9% and fixed costs go down to $435,000.- Should you enter this market? If so, should you start production today or in a year? Assume your best investment opportunity gets you 10% per year in the market. An alternative opportunity arises. You can enter the electric scooter market. Cost Structure: If you enter the market today (year zero), you have $480,000 as fixed costs and 4Q2+10Q as variable costs. All costs are due when the production starts. You will be in the short run for three years, that is, with the committed capital you will be able produce for three years. Sales: You will be able to sell 1/3 of the production at year 1(one year after the production starts), 1/3 of it at year 2, and the rest at year 3. Assume that price you can charge for your product stays at $8,000 throughout the production process. You don't have any money now but assume that you can borrow and lend money at 10% APR anytime you want. If you start the production a year from today (year 1), the sales description stays the same, that is, you can sell your product in three years following the start of production beginning one year after the production. However, you will have enough time to make necessary adjustments to have your variable costs go down by 9% and fixed costs go down to $435,000.- Should you enter this market? If so, should you start production today or in a year?

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Sure expanding into another market can be a powerful technique to broaden your contemporary enterprise An orderly technique will assist you in precise... View the full answer