has fallen on hard times since 2016. Prices have fallen for their main product, the electric typewriter. At this point, the average fixed costs for their product is $20 while their total cost is $150. The market price is only $140, so the firm is losing $10 on every typewriter sold. In spite
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MisstheMark INC. has fallen on hard times since 2016. Prices have fallen for their main product, the electric typewriter. At this point, the average fixed costs for their product is $20 while their total cost is $150. The market
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- BK Books is an online book retailer that also has 10,000 “bricks and mortar”outlets worldwide. You are a risk-neutral manager within the CorporateFinance Division and are in dire need of a new financial analyst. You only interview students from the top MBA programs in your area. Thanks to your screening mechanisms and contacts, the students you interview ultimately differ only with respect to the wage that they are willing to accept. About 10 percent of acceptable candidates are willing to accept a salary of $140,000, while 90 percent demand a salary of $190,000. There are two phases to the interview process that every interviewee must go through. Phase 1 is the initial one-hour on-campus interview. All candidates interviewed in Phase 1 are also invited to Phase 2 of the interview, which consists of a five-hour office visit. In all, you spend six hours interviewing each candidate and value this time at $2,500. In addition, it costs a total of $8,000 in travel expenses to interview each…In the context of the shareholder wealth-maximization model of a firm, what is the expected impact of each of the following events on the value of the firm? Explain why.a. New foreign competitors enter the market.b. Strict pollution control requirements are enacted.c. A previously nonunion workforce votes to unionize.d. The rate of inflation increases substantially.e. A major technological breakthrough is achieved by the firm, reducing its costs of production.Semi-Salt Industries began its operation in 1975 and remains the only firm in the world that produces and sells commercial-grade polyglutamate. While virtually anyone with a degree in college chemistry could replicate the firm’s formula, due to the relatively high cost, Semi-Salt has decided not to apply for a patent. Despite the absence of patent protection, Semi-Salt has averaged accounting profits of 5.5 percent on investment since it began producing polyglutamate—a rate comparable to the average rate of interest that large banks paid on deposits over this period. Do you think Semi-Salt is earning monopoly profits? Why?
- How would each of the following actions be expected to affect shareholder wealth?a. Southern Company adopts fuel-switching technology at its largest power plants.b. Ford Motor Company pays $2.5 billion for Jaguar.c. General Motors offers large rebates to stimulate sales of its automobiles.d. Rising interest rates cause the required returns of shareholders to increase.e. Import restrictions are placed on the French competitors of Napa wineries.f. There is a sudden drop in the expected future rate of inflation.g. A new, labor-saving machine is purchased by Wonder Bread and results in the layoff of 300 employees.In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.Draw the difference between zara business model and its direct competitors
- You are planning to open an internet business selling stock market analysis, and are offering two options to consumers: A: You charge $150 per year. This grants access to all of your basic financial literacy information, as well as 12 months of access to your stock market analysis memos, which you provide monthly. B: You charge $50 for access to your basic financial literacy information, then charge $10 each for your monthly stock market analysis memos. Which one is the best offer?From March 26 to July 17, 2020, the share price of The Champion SA (C share) fell by 17% and that of The Fury SA (F share) by 34%, without any specific news and without any significant event impacting their normal operations. The Fury SA share (F share) fell by 34%, without any specific news for these two companies and without any significant event impacting their normal operations. The Fury SA operates in the steel production sector, while The Champion SA is in the distribution of luxury goods Which of these two companies has, in principle, the higher proportion of fixed costs? Justify the answer. Which of the two companies has the higher proportion of fixed costs? For what reason(s)?Assume that you’re the director of one of the corporations listed below and have been presented with the business opportunity described in the scenario. Would you advise the corporation to accept the opportunity? Consider both the financial return expected and any related ethical concerns. ToyCo has just been informed that its wooden trains produced in China contain lead paint and can no longer be sold in the United States. However, a distributor offers to negotiate a deal with a foreign company to sell the trains in a South American country that has no laws addressing the presence of lead paint in children’s toys. BabyHealth is seeing decreasing sales of its powdered infant formula in the United States due to more and more mothers choosing to breastfeed their babies. In an effort to offset these losses, BabyHealth chooses to sell its formula in third-world countries. However, it is widely known that the water sources in these countries are often contaminated and not boiled prior to…
- You are the manager of Taurus Technologies, and your sole competitor is Spyder Technologies. The two firms’ products are viewed as identical by most consumers. The relevant cost functions are C(Qi) = 2Qi, and the inverse market demand curve for this unique product is given by P = 110 −3 Q. Currently, you and your rival simultaneously (but independently) make production decisions, and the price you fetch for the product depends on the total amount produced by each firm. However, by making an unrecoverable fixed investment of $100, Taurus Technologies can bring its product to market before Spyder finalizes production plans. (Assume Taurus Technologies is the leader in this scenario.) What are your profits if you do not make the investment? $ What are your profits if you do make the investment? Instructions: Do not include the investment of $100 as part of your profit calculation. $Forey, Inc., competes against many other firms in a highly competitive industry. Over the last decade, several firms have entered this industry and, as a consequence, Forey is earning a return on investment that roughly equals the interest rate. Furthermore, the four-firm concentration ratio and the Herfindahl-Hirschman index are both quite small, but the Rothschild index is significantly greater than zero. Based on this information, which market structure best characterizes the industry in which Forey competes? Explain.On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $21 per share. After 1 quarter, you received $0.25 per share dividends each quarter for 2 years. At that point, the stock price had gone down in a short-term recession, so you purchased 10 more shares at $18 per share. The stock continued to pay 25¢ a share on all 20 shares. After 3 years (12 quarters), you decided to sell the stock since it had increased in market value to $24 per share. Make the following assumptions: (a) no commissions for the purchase or sale of the stock, (b) no government taxes on the dividends, and (c) quarterly compounding of the rate of return. What is the effective interest rate per year? The effective interest rate per year is %.