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Suppose that if GSI drops the price on the Glucoscan 3000 immediately, it can increase sales over ...
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Suppose that if GSI drops the price on the Glucoscan 3000 immediately, it can increase sales over ...
Suppose that if GSI drops the price on the Glucoscan 3000 immediately, it can increase sales over the next year by 30% to 130,000 units. The incremental impact of this price drop on the firms EBIT is closest to:
A) a decline of 1.5 million.
B) an increase of 1.5 million.
C) a decline of 2.4 million.
D) an increase of 2.4 million.
Textbook
Corporate Finance: The Core
Edition:
4
th
Authors:
Berk, DeMarzo
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A
Explanation: A) Without price cut = 100,000 units × ($129 - 50) = $7,900,000
With price cut = 130,000 units × ($99 - 50) = $6,370,000
So, incremental = 6,370,000 - 7,900,000 = -1,530,000
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