A manufacturer makes lightbulbs and claims that their reliability is 98 percent. Reliability is defined to be the proportion of
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Answer:
Since net revenue has increased from $140 million to $246 million = $106 million by considering all costs thus all the costs and revenue shall be considered.
Explanation:
For calculating the present value, all the cost and revenue will be considered.
Original revenue = Sale of 10 million chips
10 million $20 = $200 million
Less: Cost = 10 million $6 = $60 million
Net Revenue = $140 million
In case of introducing new chips
Revenue will be as follows
12 million $25 + 3 million
$20
= $300 million + $60 million = $360 million
Less: Costs 12 million $8 + 3 million
$6
= $96 million + $18 million = $114 million
Net Revenue = $360 - 114 = $246 million
Since net revenue has increased from $140 million to $246 million = $106 million by considering all costs thus all the costs and revenue shall be considered.