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Chan Manufactures and Sells 10 Million Bags to Its International

question 93

Essay

Chan manufactures and sells 10 million bags to its international market at a cost of $20.00 each.It is about to introduce a new line of bags due to past success and forecast sales to be 12 million bags at a new price of $25 each.Sales on the old bags are anticipated to fall to 3 million.The old bags cost $6 each to manufacture, and the new ones will cost $8 each.What will be the cash flow used to evaluate the present value of the introduction of the new bag?


Definitions:

Independent Agents

Salespeople who sell a manufacturer’s products on an extended contract basis but are not employees of the manufacturer; also known as manufacturer’s representatives or reps.

Selling Company

A company or entity that is engaged in the act of selling goods, services, or both to consumers or other businesses.

New Buy

A purchase decision where a customer is buying a product or service for the first time, requiring significant research and evaluation.

Modified New Buy

A purchasing situation wherein a company makes some changes or modifications to a product they are buying again.

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