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What is the minimum selling price that extreme adventure

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Reference no: EM132740417

The TrekWatch Co. produces a wide variety of watches outdoor oriented sports fan. Its newest division, the Extreme Adventure, manufactures and sells a single model: the Ulisses- a watch with outstanding navigational capabilities that leverages multiple global satellite positioning systems. The demand for the Ulisses is relatively insensitive to price changes.

The following data are available for The Private Equity Watcher, which is an investment information aggregator for potential investors:

Total annual ?xed costs $30,000,000

Variable cost per Ulisses $500

Number of Ulisses sold each year 150,000

Average operating assets invested in the division $48,000,000

Problem 1. Compute Extreme Adventure's ROI if the selling price of Ulisses is $720 per watch.

Problem 2. If management requires an ROI of at least 25% from the division, what is the minimum selling price that the Extreme Adventure Division should charge per Ulisses watch?

Problem 3. Assume that TrekWatch Co. judges the performance of its investment centers on the basis of RI rather than ROI. What is the minimum selling price that Extreme Adventure should charge per Ulisses if the company's required rate of return is 20%?

Reference no: EM132740417

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