Maize water is considering introducing a water filtration device for its 20-ounce water bottles. market research indicates that 1,000,000 units can be sold if the price is no more than $3. if maize water decides to produce the filters, it will need to invest $2,000,000 in new production equipment. maize water requires a minimum rate of return of 16% on all investments. determine the target cost per unit for the filter

Question

Fletcher Glover

Business

28 August, 11:15

Maize water is considering introducing a water filtration device for its 20-ounce water bottles. market research indicates that 1,000,000 units can be sold if the price is no more than $3. if maize water decides to produce the filters, it will need to invest $2,000,000 in new production equipment. maize water requires a minimum rate of return of 16% on all investments. determine the target cost per unit for the filter

+3

Answers (1)

Know the Answer?

Nancy Long · Answer 1

Maize water is required to invest $2,000,000. It requires a 16% return on investment, so it will require $2,000,000 x (116%) in revenue to meet this return. It will need to generate $2,320,000 of revenue. It can sell 1,000,000 units, so it will need to price each unit at $2.32 in order to meet its return objective.