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Hyperion? Inc., currently sells its latest? high-speed colour? printer, the Hyper? 500, for $330. Its cost of goods sold for the Hyper 500 is $189 per? unit, and this? year's sales? (at the current price of $330?) are expected to be 16,000 units. Hyperion plans to lower the price of the Hyper 500 to $283 one year from now.

a. Suppose Hyperion considers dropping the price to $283 ?immediately, (rather than waiting one? year). By doing so it expects to increase this? year's sales by 26% to 20,160 units. What would be the incremental impact on this? year's EBIT of such a price? drop?

b. Suppose that for each printer? sold, Hyperion expects additional sales of $74 per year on ink cartridges for the? three-year life of the? printer, and Hyperion has a gross profit margin of 76% on ink cartridges. What is the incremental impact on EBIT for the next three years of dropping the price immediately? (rather than waiting one? year)?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92399013

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