Your organization has developed a new product (let us call it A) which is 1000...
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Your organization has developed a new product (let us call it A) which is 1000 dollars more expensive to purchase as compared with a similar product now available in the market (let us call it B). B currently costs 8000 dollars to purchase. The operating cost of A is however lower: 300 dollars per year. B costs 400 dollars per year to operate. Assume that the customers of these products base their purchase decisions on money considerations alone.
How much rebate you will have to offer in order to induce the customers to purchase A (instead of B) if the discount rate is 7 percent, and each product has an infinitely long useful economic life?
(your answer must be rounded off to the nearest dollars, i.e., no decimal places)
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