Suppose orange Inc. is considering a new product launch, CEo asks for your help: The new project is to produce oPhone 6Super (just a little more expensive than current version, other than that, you can't tell the difference). It will cost $72,000 to purchase new equipment, which has a three-year life and no salvage value; depreciation is straight-line to zero. The oPhone price will be sold at $500 each, no discount at any time, variable cost per unit is $200, costs would be $5,000 per year, tax rate is 35%. Annual market consumption of mobile phones is 300, orange and Singsong split the market, with 50% market share each. In addition, Orange is filing a against Singsong, if orange wins a patent verdict against Singsong, lawsuit Market would Orange would increase its market share up to 90%, otherwise, Orange's share drop to 10%. Required rate of return is 15%.
