Socres Sport Industries has decided to go ahead and start development of an inno

Question

Socres Sport Industries has decided to go ahead and start development of an innovative sport product. The total R&D costs are estimated to reach around $800,000 with launch costs mounting to $145,000. The current annual market size is estimated to be around 136,000 and is expected to grow at 4 percent every year. The market share Socres hopes to capture in the first year is 6 percent and is projected to grow by 25 percent each year for the next 4 years. Each unit of the product is anticipated to generate revenue of $280 while incurring variable costs of $150. A discount rate of 6 percent is assumed.

Calculate the projected sales for year 1. (That is, the estimated sales volume (number of units) for the first year considering the market size and Socres market share)

D. 1,800,00

Calculate Total Project Costs.

$ 1,020,000,000

$ 945,000

$ 3,000,000

Calculate the market share percentage in the third year.

D. 8 percent

Calculate the annual revenue for the fourth year.

Calculate the annual cost incurred for the second year.

Calculate the projected profit for the third year.

$ 821,340,000

Calculate cumulative net profit at the fourth year.

$ 1,986,882,000

Calculate the net present value for Socres' new product.

$7,843,366.41

$6,898,366.41

A. 136,000 B. 21,000 C. 8,160

D. 1,800,00

Calculate Total Project Costs.

A.

$ 1,020,000,000

B.

$ 945,000

C. $ 145,000,000 D.

$ 3,000,000

Calculate the market share percentage in the third year.

A. 25 percent B. 4 percent C. 9 percent

D. 8 percent

0.0/ 2.0 Points

Calculate the annual revenue for the fourth year.

A. $ 5,019,706 B. $ 2,325,304 C. $ 1,494,838 D. $ 1,660,932
0.0/ 2.0 Points

Calculate the annual cost incurred for the second year.

A. $ 1,591,200 B. $ 491,400,000 C. $ 638,820,000 D. $ 351,000,000
0.0/ 2.0 Points

Calculate the projected profit for the third year.

A. $ 1,792,752 B. $ 1,494,838,800 C. $ 2,373,996 D.

$ 821,340,000

Calculate cumulative net profit at the fourth year.

A. $ 1,494,838,800 B. $ 1,312,041,240 C.

$ 1,986,882,000

D. $ 5,618,170

Calculate the net present value for Socres' new product.

A. $ 3,702,463,939 B.

$7,843,366.41

C. ($ 932,028,690) D.

$6,898,366.41

Explanation / Answer

Solution 1:

Projected sales for year 1 = Market share of year 1 * 6% = 136,000 *6% = 8,160 units

Hence option C is correct.

Solution 2:

Total project cost = R&D Cost + Launching cost = $800,000 + $145,000 = $945,000

Hence option B is correct.

Solution 3:

Market share percentage in third year = 6% *125%*125% = 9% (rounded off)

Hence option C is correct.

Solution 4:

Annual revenue for 4th year = 136000 * (1.04)^3 * [6%*125%*125%*125%) * $280 = $5,019,706

Hence option A is correct.

Note: I have answered first 4 parts of the question as per chegg policy, kindly post separate question for answer of remaining parts.

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