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Value of Erosion

A Spa Company currently sells 300 Class A spas, 450 Class C Spas and 200 deluxe model spas each year. The firm is considering adding a mid class spa and expects that if it does it can sell 375 of them. However if the new spa is added Class A sales are expected to decline to 225 units while the Class C Sales are expected to decline to 200. The sales of the deluxe model will not be affected. Class A spas sell for an average of $12,000 each. class C. spas are priced at $6000 and the deluxe model sells for $17,000 each. The new mid range spa will sell for $8,000. What is the value of the erosion?

Solution Summary

The solution computes value of erosion for new mid range spa.