Hyperion, Inc. currently sells its latest​ high-speed colour​ printer, the Hyper​ 500, for $371. It plans to lower the price to $318 next year. Its cost of goods sold for the Hyper 500 is $212 per​ unit, and this​ year's sales are expected to be 21,000 units.   a. Suppose​ that, if Hyperion drops the price to $318 ​immediately, it can increase this​ year's sales by 27% to 26,670 units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?   b. Suppose​ that, for each printer​ sold, Hyperion expects additional sales of $78 per year on ink cartridges for the three​ years, and Hyperion has a gross profit margin of 61% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this​ year?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Hyperion, Inc. currently sells its latest​ high-speed colour​ printer, the Hyper​ 500, for $371. It plans to lower the price to $318 next year. Its cost of goods sold for the Hyper 500 is $212 per​ unit, and this​ year's sales are expected to be 21,000 units.

 

a. Suppose​ that, if Hyperion drops the price to $318 ​immediately, it can increase this​ year's sales by 27% to 26,670 units. What would be the incremental impact on this​ year's EBIT of such a price​ drop?

 

b. Suppose​ that, for each printer​ sold, Hyperion expects additional sales of $78 per year on ink cartridges for the three​ years, and Hyperion has a gross profit margin of 61% on ink cartridges. What is the incremental impact on EBIT for the next three years of a price drop this​ year?

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