#6. (10pts) You forecasted the incremental earnings for a project. Now you consi

ID: 364713 • Letter: #

Question

#6. (10pts) You forecasted the incremental earnings for a project. Now you considered the indirect effects of the projects that may affect the profits of other business activities of the same firm (Show your work) Table before the project externalities Year 1 26,000 Year 3 Year 4 26,000 (9,500) Sales 26,000 (9,500) Cost of Goods (9,500) (9,500) Sold Table after the project externalities: 15% of sales come from customers who would have purchased an old product if the new products were not available. (100,000 units new product sales, $100 per unit old product price per unit, and $60 per unit- old product unit cost) Year 1 Year 2 Year 3 Year 4 Sales (5pts) Cost of Goods Sold (5pts)

Explanation / Answer

15% of comes come from customers who would have purchased an old product

Old product price per unit= $100

Amount to be deducted from sales of each year=15*100=1500

Similarly amount to be deducted from cost of goods sold from each year = 60*15 =900

Year1

Year2

Year3

Year4

sales

24500

Cost of goods sold

(8600)