You have just been hired as the Associate Brand manager for a new cereal company....
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You have just been hired as the Associate Brand manager for a new cereal company. This new company has developed a hazel nut - granola combination product that had tested extremely well with focus groups. Young adults between the ages of 18-29 rated it the best cereal they had ever tasted. The company has forecasted to sell a whopping 49,800 boxes of this new product in 2021. Other information provided to you were that the company has fixed costs of $280,000, depreciation expense of $120,000, a tax rate of 30% and interest expense of $21,300.
You find out from the production team that each cereal box will cost $15.89 to produce. The new general manager is insisting that operating cashflows must be no less than $141,305 for this new product launch in 2021.
As the Associate Brand Manager, your job is to set the price of this new product. What is the minimum price that should be charged for this product? Show all your calculations.
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