Innovation Products International (IPI)

Innovation Products International (IPI) is a health foods company which Show more Financial Analysis Scenario Innovation Products International (IPI) is a health foods company which recently discovered that increased soy isoflavones (at least 500 mg every 2 days) in a persons diet has been able to extend a persons life span by at least 20 years. The company developed a new product called Soy for Life which is a tasty breakfast bar that contains 500 mg of soy isoflavones in each bar. Cost of research and development for the product was $8250000. The breakfast bar market size is currently measured at 80 million bars of which IPI serves 25%. Initial taste tests concluded that consumers are unable to make any taste distinctions between a regular breakfast bar and one that contains 500 mg of isoflavones. IPI plans to launch this new breakfast bar initially across the United States using its current distribution channel of supermarket chains and health food stores which have 5000 locations combined. The company then planIs to expand the product market area to include South America Europe and Asia and also intends to setup manufacturing plants in these expanded market areas. Newspaper advertising will carry a coupon that will entitle the consumer to receive $0.20 off the price of the first breakfast bar purchased. Past experience indicates that for every five breakfast bars sold during the introductory year one coupon will be returned. The cost of the newspaper advertising (excluding coupon returns) will be $225000. Other fixed costs will be $1950000 million per year with the cost to produce each breakfast bar at $1.65. The finding of several research studies has determined that consumers would be willing to pay $8.15 for Soy for Life breakfast at which the retail selling price would be targeted. The retailers margin is 30% and the wholesalers margin is 20%. Formulas to be used for this exam include: BE= Fixed Costs/ (Unit selling price Unit variable cost) CLV = $M (1/(1+i-r)) Show less

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