Please read the following scenario carefully, before you answer the question below: (a) the Retail Selling Price of the

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Please read the following scenario carefully, before you answer
the question below:
(a) the Retail Selling Price of the MX350 is $219 in 1997,
(b) the retailer’s markup is 50% (of retailer’s SP),
(c) CIMA sells directly to these retailers,
(d) CIMA’s markup is 15% (of manufacturer’s SP),
(e) CIMA’s selling prices increase by 4% every year (the
increases take effect in 1998),
(f) CIMA’s cost prices increase by 3% every year (the increases
take effect in 1998),
(g) CIMA expects to sell 414 units in 1997, 538 units in 1998,
897 units in 1999, 1,778 units in 2000 and 2,249 units in 2001,
(h) the cost of capital for CIMA is 15%,
(i) CIMA’s investment in the MX350 was $50,000, and,
(j) year 0 (zero), for PV discounting purposes was 1996.
What will be the PV of CIMA’s profit for this product in
2000?
a.
$ 21,825.91
b.
$ 7,326.56
c.
$ 26,108.81
d.
$ 5,911.20
e.
$ 11,613.01