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Payback period.

Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds. Looking at the Round 0 Inquirer for Andrews, last year's sales were $162,769,074. Assuming similar sales next year, the 1.7% increase in demand will provide $2,767,074 of additional revenue. With the overall contribution margin of 33.6%, after direct costs this revenue will add $929,737 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $2,000,000 TQM investment, rounded to the nearest month?

A. 9 months
B. 26 months
C. 18 months
D. TQM investment will not have a significant financial impact

Solution Preview

Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds. Looking at the Round 0 Inquirer for Andrews, last year's sales were $162,769,074. Assuming similar sales next year, the ...

Solution Summary

Solution shows calculation of payback period of the initial $2,000,000 TQM investment.

$2.19