Repulse is not certain whether Citronex should be introduced into the market, because the management fears that the financial risks of doing so are substantial. Managers who are convinced that it should cites the potential profits and cash flows the product could bring. In analysing the merits of either side, it is determined that if the product performs as forecasted, Citronex will be profitable; however, it is also risky in that if the demand and price are lower than forecasted by even a small degree, the financial losses are magnified and may be substantial.
Repulse Travel Pharmaceuticals, a UK based medium sized firm, is presently deliberating on whether or not it shall launch a new spray product “Citronex,” which has an estimated five year commercial life. The firm has spent £150,000 on product and market research on Citronex.
The aim of this report is to provide an analysis by which management may decide whether or not the manufacture and sale of Citronex should be undertaken. The report intends to accomplish this task by conducting an estimation, based on forecasted demand and selling price, of the profit and cash flows the company is likely to realize. Its objectives, therefore, include:
1.2.1 an estimation of profit and loss as well as cash flows based on the given information under conditions of certainty on the forecasted demand and selling price
1.2.2 an estimation of profit and loss as well as cash flows based on the given information under the likely conditions that the demand may rise or fall ...