Posted: August 8th, 2015

Capital Budgeting

Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The rm expects that sales of the new pizza will be GHS20 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 40% will come from customers who switch to the new, healthier pizza instead of buying the original version. (a) Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza?. (b) Suppose that 50% of the customers who will switch from Pisa Pizzas original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?