Question 5: Calculate the Gross Margin estimates for the first five years for the different price options and demand forecast scenarios (use Table B in the next page as a guide). What is the ROI* over the first five years for each of the pricing strategies and demand forecast scenarios (see Table C for fixed cost estimates)? What impact does your pricing decision have on profitability?

Gross Margin Estimates $75 Retail Price Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative Forecast Method 1 $ 17,512,421.00 $ 26,268,631.00 $ 35,024,842.00 $ 43,781,052.00 $ 52,537,262.00 $ 175,124,208.00 Forecast Method 2 $ - $ - $ - $ - $ - $ - Forecast Method 3 $ - $ - $ - $ - $ - $ - $125 Retail Price Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative Forecast Method 1 $ 41,048,267.00 $ 61,572,400.00 $ 82,096,534.00 $ 102,620,667.00 $ 123,144,801.00 $ 410,482,669.00 Forecast Method 2 $ - $ - $ - $ - $ - $ - Forecast Method 3 $ - $ - $ - $ - $ - $ - $150 Retail Price Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative Forecast Method 1 $ 52,819,721.00 $ 79,229,581.00 $ 105,639,442.00 $ 132,049,302.00 $ 158,459,162.00 $ 528,197,208.00 Forecast Method 2 $ - $ - $ - $ - $ - $ - Forecast Method 3 $ - $ - $ - $ - $ - $ - Cumulative 5-year Fixed Cost Estimates Fixed Costs Sunk Costs Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative Marketing $ - $ 23,146,000.00 $ 14,896,000.00 $ 14,896,000.00 $ 14,896,000.00 $ 14,896,000.00 $ 82,730,000.00 Maunfacturing/OH $ - $ 1,200,000.00 $ 1,200,000.00 $ 1,200,000.00 $ 1,200,000.00 $ 1,200,000.00 $ 6,000,000.00 R&D $ 400,000,000.00 $ - $ - $ - $ - $ - $ 400,000,000.00 Total $ 400,000,000.00 $ 24,346,000.00 $ 16,096,000.00 $ 16,096,000.00 $ 16,096,000.00 $ 16,096,000.00 $ 488,730,000.00 5-year ROI Calculcations $75 Retail Price Fixed Costs ROI Forecast Method 1 $ 488,730,000.00 -64% Forecast Method 2 $ 488,730,000.00 Forecast Method 3 $ 488,730,000.00 $125 Retail Price Forecast Method 1 $ 488,730,000.00 -16% Forecast Method 2 $ 488,730,000.00 Forecast Method 3 $ 488,730,000.00 $150 Retail Price Forecast Method 1 $ 488,730,000.00 8% Forecast Method 2 $ 488,730,000.00 Forecast Method 3 $ 488,730,000.00

Gross Margin Dstimates S75 Retail PriceYear 1 Forecast Method S7,512.421.00 S 26,268,631.0035,024,842.00S43,781,052.00 52,537,262.00 $75,124,208.00 Forecast Method2S Forecast Method3S Year 4 Cumulative Year ear ear Year 4 S125 Retail PriceYear 1 Forecast Method S41,048,267.00 S 61,572.400.0082,096,534.00 Forecast Method2S Forecast Method3S Cumulative Year ear ear 02,620,667.00 123,144,801.00 $410,482,669.00 Year 4 S150 Retail PriceYear 1 Forecast Method S52,819,721.00 S 79,229,581.00 Forecast Method2S Forecast Method3S Cumulative Year ear ear 105,639.442.0032,049,302.00 158,459,162.00 $528,197,208.00 Cumulative 5-year Fxed Cost Estimates Year 4 Fixed Costs Sunk Costs Cumulative Year $23,146,000.00 S 14,896,000.00 S14,896,000.00 S 4,896,000.00 $ $00,000.00 S1,200,000.00 S200,000.00 S ,200,000.00 $ Year ear ear Marketing 14,896,000.00 $ 82,730,000.00 6,000,000.00 S 400.000,000.00 16,096,000.00 $ 488,730,000.00 Maunfacturing OH S 1,200,000.00 S R&D $ 400,000,000.00 S Total S 400,000,000.00 S 24,346,000.00 S 16,096,000.00 S 16,096,000.00 S 6,096,000.00S 5-year ROT Calculcations S75 Retail Price Fixed Costs orecast Metho $488,730,000.00 Forecast Method 2 $488,730,000.00 Forecast Method3$488,730,000.00 ROT -64% S125 Retail Price Forecast Method $ 488,730,000.00 16% Gross Margin Dstimates S75 Retail PriceYear 1 Forecast Method S7,512.421.00 S 26,268,631.0035,024,842.00S43,781,052.00 52,537,262.00 $75,124,208.00 Forecast Method2S Forecast Method3S Year 4 Cumulative Year ear ear Year 4 S125 Retail PriceYear 1 Forecast Method S41,048,267.00 S 61,572.400.0082,096,534.00 Forecast Method2S Forecast Method3S Cumulative Year ear ear 02,620,667.00 123,144,801.00 $410,482,669.00 Year 4 S150 Retail PriceYear 1 Forecast Method S52,819,721.00 S 79,229,581.00 Forecast Method2S Forecast Method3S Cumulative Year ear ear 105,639.442.0032,049,302.00 158,459,162.00 $528,197,208.00 Cumulative 5-year Fxed Cost Estimates Year 4 Fixed Costs Sunk Costs Cumulative Year $23,146,000.00 S 14,896,000.00 S14,896,000.00 S 4,896,000.00 $ $00,000.00 S1,200,000.00 S200,000.00 S ,200,000.00 $ Year ear ear Marketing 14,896,000.00 $ 82,730,000.00 6,000,000.00 S 400.000,000.00 16,096,000.00 $ 488,730,000.00 Maunfacturing OH S 1,200,000.00 S R&D $ 400,000,000.00 S Total S 400,000,000.00 S 24,346,000.00 S 16,096,000.00 S 16,096,000.00 S 6,096,000.00S 5-year ROT Calculcations S75 Retail Price Fixed Costs orecast Metho $488,730,000.00 Forecast Method 2 $488,730,000.00 Forecast Method3$488,730,000.00 ROT -64% S125 Retail Price Forecast Method $ 488,730,000.00 16%