2. Relevant Cash Flows. Winnebagel Corp. currently sells 30,000 motor homes per

Question

2. Relevant Cash Flows. Winnebagel Corp. currently sells 30,000 motor homes per year at $53,000 each, and 12,000 luxury motor coaches per year at $91,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to tell 19,000 of these campers per year at $13,000 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 4,500 units per year, and reduce the sales of its motor coaches by 900 units per year. What is the amount to use as the annual sales figure when evaluating this project? Why?

How do you do this? What is the answer?

Explanation / Answer

Present sales 30,000 x $53,000 = 1590,000,000 12,000 x $91,000 = 1092,000,000 Total $2682,000,000 Projected sales 19,000 x $13,000 = 247,000,000 34,500 x $53,000 = 1828,500,000 11,100 x $91,000 = 1010,100,000 Total $3085,600,000

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