Pop Tarts Inc currently sells 300,000,000 units of PopTarts. Their unit sell price is 2.00 with variable costs of 1.30. The company wants to introduce the new Pop Tarts Gone Nutty with real pieces of peanuts added to the product. Their sell price will be $2.25 with variable costs of $1.60.

Assume the company expects to sell 5 million packages of Pop-Tarts Gone Nutty! in the first year after introduction but expects that 80 percent of those sales will come from buyers who would normally purchase existing Pop-Tart flavors (that is, cannibalized sales).

Assuming the sales of regular Pop-Tarts are normally 300 million packages per year and that the company will incur an increase in fixed costs of $500,000 during the first year to launch Gone Nutty!, Will the new product be profitable for the company? Should they add the new product?