Establishing a Base Case Christopher's initial analysis established the expected price point for retailers at $$22$ per unit for Advanced Seal, compared to $$18$ and $$13$ per unit for P&G$\text{'}$s Premium and Basic offering, respectively. Christopher had worked with his supply chain leaders to estimate the cost structure. The new technology would run at a cost of $$5$ per unit cost more than the current Premium product offering, such that the gross profit for Advanced Seal would be lower than for Premium. Exhibit $22\mathrm{.}6$ provides the summary assessments that had coalesced regarding the unit price and cost for the Crest Whitestrips products. EXHIBIT $22\mathrm{.}6|$ Gross Profit Comparison

The forecasting models s$$ggested a base case annual forecast of $2$ million units

for Advanced Seal. The analysis also suggested that cannibalization of existing

Crest Whitestrips products would be high, on the order of $50\%$ to $60\%$ for

Premium units and $15\%$ for Basic units. Such cannibalization rates meant that

$65\%$ to $75\%$ of Advanced Seal's $2$ million expected units was coming straight

out of existing P&G sales.

Preliminary discussions around advertising spending indicated an expected

launch budget of $$6$ million per year. He estimated that the cannibalized

Premium and Basic products already received $$4$ million per year in

advertising support that would no longer be required after the launch. This

meant the group would have to spend an incremental $$2$ million in advertising

to support the launch. He also needed to include $$1$ million per year for

incremental selling, general, and administrative expenses. $2.$ Does the project appear economically viable? Which strategic proposal do you find most appealing? Build a four$-$year DCF model to support your recommendation.