Stone Company is considering introducing a new line of pagers, targeting the preteen population. Stone believes that if the pagers can be priced competitively at $45, approximately 300,000 units can be sold. The controller has determined that an investment in new equipment totaling $4,000,000 will be required. Stone requires a minimum rate of return of 16% on all investments.
Instructions
Compute the target cost per unit of the pager.

Question

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The Answer of Stone Company is considering introducing a new line of pagers, targeting the preteen population. Stone believes that if the pagers can be priced competitively at $45, approximately 300,000 units can be sold. The controller has determined that an investment in new equipment totaling $4,000,000 will be required. Stone requires a minimum rate of return of 16% on all investments.
Instructions
Compute the target cost per unit of the pager.

Stone Company Is Considering Introducing a New Line of Pagers