CORRECT ANSWER D. FENNELL’S TARGET PRICE IS $268 AS SHOWN BELOW...
279.
Correct answer d. Fennell’s target price is $268 as shown below.
15% after-tax ROI
=
[($3,000,000 + $1,000,000) x .15]
=
$600,000
Per unit ROI
=
$600,000 ÷ 25,000
=
$24
Target price
=
$200 + ($700,000 ÷ 25,000) + [$24 x (1 - .4)]
=
$200 + $28 + $40
=
$268