Potential project Essay Example

losses and hinder the asset from generating enough profits to cover all costs before it is fully depreciated. Thus, it is crucial to determine the portion of sales revenue that will be received on account versus cash sales. If there are significant credit sales, further assumptions should be made regarding estimated uncollectible accounts.

Maximizing cash sales is crucial for maintaining a positive NPV of the project. If the option to lease an asset is chosen, paying an annual fee of 200,000 can still provide similar benefits as potential profits. The amount of fixed indirect costs incurred during operations is also a key factor in ensuring the success of derived profits. If significant fixed costs are incurred, the company must focus on maximizing sales to attain optimal results.

When fixed costs are not significant, companies can choose between increasing sales volume or experimenting with pricing to maximize profits. It's essential to remember that maximum sales do not always result in maximum profits. Lowering prices over the last two years to increase sales relies on the product's demand elasticity, which determines how much demand changes due to price fluctuations. If demand is high (greater than 1), a decrease in the sale price will lead to more sales and ultimately higher profits.