Recovering the Acquisition Cost. The long-run average cost of production for a pen is $3. Suppose BIC acquires PEN at a cost of $15 million and reduces the price to $2 per unit. At the new price, BIC...

Recovering the Acquisition Cost. The long-run average cost of production for a pen is $3. Suppose BIC acquires PEN at a cost of $15 million and reduces the price to $2 per unit. At the new price, BIC sells 2 million pens per year.

a. How does the acquisition affect BIC’s annual profit?

b. How many years will it take for BIC to recover the cost of acquiring PEN?