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Example 4: Increase of Unit Prices - Break-even Target 21 months from start of operations, September Y2.
Why this example? This example refers to the analytical approach to increase the unit price of licenses so to obtain break-even at the end of Y2, working with cash flows, financial statements and graphical interpretation. We shall describe how to find the unit price of licenses so to reach the break-even target at any set future date, two years in this example. A similar approach shall be followed for other break-even targets. The following, as an illustration, is the case of key management action: increase the unit price of licenses. The objective is to obtain a break-even at 21 months from the beginning of operations, September Y2, when net margin becomes zero (0). For teaching purposes we shall consider that the selling unit prices needed to obtain the target, over the baseline case, will be changed from April Y1 (the month when sales started) through September Y2. Management has found, through its market research, that there is a sustained demand for the product and that the increase in unit prices can be achieved with the available baseline budget for PR & Marketing without any further increase in spending for these activities. The following calculation procedure applies:

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