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Thompson & Son - the company feels that they can realistically capture 10 percent of the $50,000 unit market for this product. Should the company develop the new product?

Thompson & Son have been busy analyzing a new product. They have determined that an operating cash flow of $16,700 will result in zero net present value, which is a company requirement for project acceptance. The fixed costs are $12,378 and the contribution margin is $6.20. The company feels that they can realistically capture 10 percent of the $50,000 unit market for this product. Should the company develop the new product?

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Expected number of units sold = 10%*50000=5000
Total contribution Margin = ...

Solution Summary

Logic is explained in a paragraph.

$2.19