#3. (10pts) You forecast effects of the projects your work) ted the incremental

Question

#3. (10pts) You forecast effects of the projects your work) ted the incremental earnings for a project. Now you considered the indirect sthat may affect the profits of other business activities of the same firm (Show Table before the project externalities ear 4 27,00027,000 Cost of Goods! (9,5oolul (9,500)d"21 (9,500) (9,500) Year 1 Year 3 Sales 27,000 27,000 Sold Table after the project externalities: 14% of sales come from customers who would have purch ased an old product if the new products were not available. (100,000 units new product sales, $95 per unit old product price per unit, and $55 per unit old product unit cost) L_Thteraa3-1 Year 1 | Year 2 ear 3 Year 4 Sales (5pts) Cost of Goods Sold (5pts)

Explanation / Answer

Fig. in 000 1 2 3 4 Additional sales 27000 27000 27000 27000 COGS 9500 9500 9500 9500 Incremental contribution 17500 17500 17500 17500 Less: Old contribution lost 2450 2450 2450 2450 (14% of this contribution as the price and cost of the new product is same as old) Net increase in contribution 15050 15050 15050 15050 Please provide feedback…. Thanks in advance…. :-)

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