The Ford Motor Company wants to decide if the company should provide a $1,000 incentive to...

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The Ford Motor Company wants to decide if the company should provide a $1,000 incentive to purchasers of the Ford Fusion. Here are some details for the base case: • Year 1 price: $28,000 • Year 1 cost: $24,000 • 24% of the market purchases a Ford Fusion or competitive vehicle .69% of everybody who last purchased a Ford Fusion will purchase the same vehicle again. • 31% of all people who bought a competitive car will purchase a Ford Fusion for their next vehicle . The market splits 50-50-half are loyal to Ford and the other half is loyal to their current preferred manufacturer • Inflation rate is 3.5% annually • Profit hits the financials at the beginning of the year and The Ford Motor Company discounts the cash flows at 9.7% per year With this information, please answer the following questions: 1. Assuming end of your cash flows and a 30-year planning horizon, should Ford give the $1,000 incentive? Why or why not? 2. Would decreasing the discount rate to 8.3% change your answer? Why or why not? The Ford Motor Company wants to decide if the company should provide a $1,000 incentive to purchasers of the Ford Fusion. Here are some details for the base case: • Year 1 price: $28,000 • Year 1 cost: $24,000 • 24% of the market purchases a Ford Fusion or competitive vehicle .69% of everybody who last purchased a Ford Fusion will purchase the same vehicle again. • 31% of all people who bought a competitive car will purchase a Ford Fusion for their next vehicle . The market splits 50-50-half are loyal to Ford and the other half is loyal to their current preferred manufacturer • Inflation rate is 3.5% annually • Profit hits the financials at the beginning of the year and The Ford Motor Company discounts the cash flows at 9.7% per year With this information, please answer the following questions: 1. Assuming end of your cash flows and a 30-year planning horizon, should Ford give the $1,000 incentive? Why or why not? 2. Would decreasing the discount rate to 8.3% change your answer? Why or why not?

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To determine whether Ford should provide a 1000 incentive to purchasers of the Ford Fusion we need t... View the full answer