This exercise asks you to calculate Return on Investment for Colorado Ricardo Mountain Bikes.
The Scenario: Colorado Ricardo Mountain Bikes
Colorado Ricardo Mountain Bikes was founded by Ricardo Francisco, a keen off-road cyclist who grew frustrated with bikes breaking down under the strain of the Colorado mountains. After years of trial and error, he built a bike tough enough to survive the terrain and named it the “Colorado Ricardo”. Word spread quickly among local riders, and Ricardo gave up his day job to build and sell bikes full-time from a small workshop outside Denver.
Launching an e-mountain bike would require Colorado Ricardo to invest $600,000 in new tooling and battery-assembly training. Ricardo’s accountant estimates this would generate an additional $90,000 of annual profit once the line is up and running. Ricardo has set a minimum required return of 12% for any new investment.
Once you have drafted your own answer, compare it with Marketing Teacher’s suggested answer.
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