Taste good chocolates develops a new candy bar and plans to sell this bar for $1

Question

Taste good chocolates develops a new candy bar and plans to sell this bar for $1. Taste good predicts that 1 million candy bars will be sold in the first year if the new candy bar is produced and sold, and includes $1 million of incremental revenues in its capital budgeting analysis. A senior executive in the company believes that 1 million candy bars will be sold, but lowers the estimate of incremental revenue to $700,000. What would explain this change?

a. excessive marketing costs to sell the 1 million candy bars
b. a lower discount rate
c. cannibalization of 400,000 of taste good chocolates' other candy bars
d. a higher selling price for the new candy bars

Explanation / Answer

a. excessive marketing costs to se the 1 million candy bar
b. cannibalization of 300,000 of taste good chocolates' other candy bars
c. a higher seling price for the candy bars

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