Reference no: EM132795668

You are an analyst with Pecknold? Co., a company that makes? high-end guitars. Their current guitar model is called the? "Ragged Wood", and the company sells about 500 of these guitars a year at a price of? $3,000 each. This guitar costs the company? $1,500 per unit to manufacture.

1. Pecknold Co. is planning on launching a new guitar model called the? "Cassius," which will retail for? $4,000, and the company will sell about 200 of these units per year. Similarly to the? "Ragged Wood", the? "Cassius" guitar model will cost the company? $1,000 per unit to manufacture.
2. After doing some? calculations, you estimate that launching the? "Cassius" guitar model will reduce the projected sales of the existing? "Ragged Wood" model by about 4?0%.

Problem 1: Calculate the erosion cost if the product is launched.

Problem 2: Calculate the incremental cash flow if the product is launched.