Computers to sell high-powered computers to businesses

Assignment Help Financial Management

Reference no: EM131072759

You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell high-powered computers to businesses. From the two businesses’ perspectives, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering this market, and existing output firms operate under the assumption that the rival will hold constant. The inverse market demand for computes is P=5,900 – Q, and both firms produce at a marginal cost of $800 per computer. Currently, BlackSpot earns revenues of $4.25 million and profits (net of investment, R&D, and other fixed costs) of $890,000. The engineering department at BlackSpot has been steadily working on developing an assembly method that would dramatically reduce the marginal cost of producing these high powered computers and has fond a process that allows it to manufacture each computer at a marginal cost of $500. How will this technological advance impact your production and pricing plans? How will it impact Blackspot’s bottom line? Comment

Reference no: EM131072759

Questions Cloud

Assume there are no taxes or market imperfections : Kelso's is considering spending $80,000 on either a stock repurchase or an extra cash dividend. Which one of the following values will be the same whether the firm pays a dividend or repurchases stock? Assume there are no taxes or market imperfection..

Features of lowe organizational design : We discussed many features of Lowe's organizational design. If Lowe's continues to grow, what are some of the possible changes that might be considered in its organization design?

Determine the free cash flows for the project : Norwich tool is considering the replacement of an existing machine. The new machine costs $1.2 million and requires installation costs of $150,000. The existing machine can be sold currently for $185,000 before taxes. Determine the free cash flows fo..

Does the equation ax = b have a solution : If so, is the solution unique? Explain.

Computers to sell high-powered computers to businesses : You are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell high-powered computers to businesses. From the two businesses’ perspectives, the two products are indistinguishable. How will this technological adva..

The firm will lease the equipment : Buster's Beverages is negotiating a lease on a new piece of equipment that would cost $100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for 3 years and then sold, because the firm plans to move to a new faci..

Fedex office and print services : Kinko's (now FedEx Office and Print Services) has come a long way since its humble beginnings as a college town copy shop. Kinko's was the creation of Paul Orfalea, who started selling pencils and spiral notebooks on the campus of the University o..

What is the value fo the loan : A company borrowed $10 million for five years form Atlantic Bank. The company pays Atlantic Bank a fixed annual rate of 8 percent and must pay back the $10 million loan at the end of the borrowing period. A year has passed since the loan was made and..

Project using the discounting approach method : Slow Ride Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$ 29,400 1 11,600 2 14,300 3 16,200 4 13,300 5 – 9,800 The company uses an interest rate of 8 percent on all of its projects. Calculate the MIRR of the project u..

User Account

All Pages