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I don’t get in the above question how they reach the figure of $120 + inflation per unit in the Contribution for part sales in the latter part of the NPV calculation.
The question states Imoni Co will get a pre-taxed contribution of $40 for each unit. Where does $120 come from? I get how they get the rest of the figures for the contribution line just not the $120!
Currently they are selling at 200 and earning a contribution of 40. So the cost must be 160.
In future they will sell at 280, and so with a cost of 160 it means that the new contribution will be 120 🙂
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Thank you!
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