Q1 Sabih Farms is a well-known farm house in outer skirts of the city.

Its main attraction is huge

swimming pool of 100,000 Gallons of water capacity which operates throughout the year.
Swimming pool cleaning is required every month.

Cleaning cost per time is Rs. 10,000 for chemicals and labour work. Disposal of waste and
contaminants costs another Rs. 1,200 every time as this farm is in a far-off location.

You have just got the distributorship of a famous water cleaning brand from UK who are
specializes in swimming pools cleaning. They sell water cleaning “Pouches” for swimming pools
which settle at the bottom and keep the pool clean throughout the year thus required only once a
year and dissolve automatically thus no need for removal.

One pouch is good enough for 10,000 Gallons of water. You are targeting Sabih farms as your
prospective customer.

Using EVC, (Or any alternative approach), work out a Price for your water cleaning pouches.
Q2 “M/s Arham Industrial Goods” is a famous name for Boiler design and manufacturing and
their model (MN-1) holds good market share at selling price of Rs. 100,000. The cost of
manufacturing N-1 is Rs.70, 000 and useful economic life is 5 years with total maintenance cost
of Rs. 40,000 in 5 years.

Transportation cost of MN-1 is approximately Rs.50, 000. The installation and setup cost is
around Rs. 20,000 and machine is disposed at the end of 5 years at a 50% of initial purchase
price. “Rahina Technicals”, a close rival, has come up with an advanced version (BL-1).

The cost of manufacturing BL-1 is Rs. 50,000 and because of its reduced size and weight,
transportation cost is reduced to one half as compared to MN-1. Due to ease of operation and
modern design, the Installation and setup of BL-1 is free of charge.

Useful economic life of BL-1 is same as that of MN-1 however BL-1 is sold as scrap at
negligible value after 5 years due to parts worn out. BL-1 requires relatively less maintenance so
total maintenance cost estimates around Rs 25,000 in 5 years. Fuel cost and output for both
models are equal.

i. What is Total Value Creation with BL-1.

ii. Work out the Maximum Price that can be charged for BL-1.