Graph to demonstrate the costs and benefits

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Suppose you own a company that makes fishing poles. Business is good with annual revenue of $1 million and profits of $100,000. One day a bright young employee comes to you and says he has developed a better fishing pole that will increase profits by 50% a year. You test the new pole and are convinced the pole is superior. However, you estimate it will require an investment of $200,000 in new machinery and equipment, marketing, etc., to start producing the new pole. You figure it will take a year before the new fishing pole is selling 50% more than the old fishing pole. Should you take the gamble? Graph to demonstrate the costs and benefits. What is the minimum annual return you require to invest in this new fishing pole?

Reference no: EM131891826

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