Cold air to flow into the engine improving performance

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Reference no: EM131287115

TMI (Thomas Motor Industries) makes high quality air filters for performance automobiles. The filters for Acura and Honda models sell for $32 each. A additional step/product change to the current design in the filters allows more cold air to flow into the engine improving performance. If the change is implemented the selling price per filter would be $46 each. TMI expects the market for the new design to be 600 filters initially and determines that the production costs to implement the new design would be $6,800. Should TMI produce the new design or continue with the old and why?

A. Yes, TMI should proceed with the change as they will see an incremental profit of $2.67 per filter.

B. Yes, TMI should proceed since the project has a negative NPV.

C. No, TMI should not proceed as the potential liability from making the filters exceeds the potential profits.

D. No, TMI should not proceed because the payback periods are too long.

Reference no: EM131287115

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