Using IDDR approch, discuss the decision process Stilton should use in deciding whether to disclose the risk of fraudulent policies to potential investors.
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Jason Stilton is the chief executive officer of RightLiving a company that buys life insurance policies at a discount from terminally ill persons and sells the policies to investors for 85% of the value of the future benefit. The patients recieve the cash to use for medical and other expenses and the investors are guaranteed a positive return on thier investment. The diffreance between the purchace and sale prices is the RightLivinf Profit.
Stilton is aware that some sick patients may obtain insurance policies through fraud (Not revealing thier illness on the insurance application). An insurance company that discovers such will cancel the policy and refuse to pay. Stilton beleives that most of the policies he has purchased are legitimate, but he knows some are probably not.
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Using IDDR approch, discuss the decision process Stilton should use in deciding whether to disclose the risk of fraudulent policies to potential investors.
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- Define positive and negative discounting and give examples of eachG.R. Dry Foods Distributors specializes in the wholesale distribution of dry goods, such as rice and dry beans. The firm’s manager is concerned about an article he read in this morning’s The Wall Street Journal indicating that the incomes of individuals in the lowest income bracket are expected to increase by 10 percent over the next year. While the manager is pleased to see this group of individuals doing well, he is concerned about the impact this will have on G.R. Dry Foods.What do you think is likely to happen to the price of the products G.R. Dry Foods sells? Why? The price will increase, because dry beans and rice are normal goods. The price will increase, because dry beans and rice are inferior goods. The price will decrease, because dry beans and rice are inferior goods. The price will decrease, because dry beans and rice are normal goods.Q. Gamma Corporation, one of the firms that retains you as a financial analyst, is considering buying out Beta Corporation, a small manufacturing firm that is now barely operating at a profit. You recommend the buyout because you believe that new management could substantially reduce production costs, and thereby increase profit to a quite attractive level. You collect the following product information in order to convince the CEO at Gamma Corporation that Beta is indeed operating inefficiently: MPL = 10 PL =$20 MPK = 15 PK =$15 Explain how these data provide evidence of inefficiency. How could the new manager of Beta Corporation improve efficiency? Thank you!
- Suppose that a CEO’s goal is to increase profitability and output from her company by bolstering its sales force and that it is known that profits as a function of output are π = 40q − 2q2(in millions of U.S. dollars). Graph the company’s profit function. Compare and contrast output and profits using the following compensation schemes based on the assumption that sales managers view output and profits as “goods”: (a) the company compensates sales managers solely based on output, (b) the company compensates sales managers solely based on profits, and (c) the compG.R. Dry Foods Distributors specializes in the wholesale distribution of dry goods, such as rice and dry beans. The firm’s manager is concerned about an article he read in this morning’s Wall Street Journal indicating that the incomes of individuals in the lowest income bracket are expected to increase by 10 percent over the next year. While the manager is pleased to see this group of individuals doing well, he is concerned about the impact this will have on G.R. Dry Foods. What do you think is likely to happen to the price of the products G.R. Dry Foods sells?Now,suppose N=3 with a market clearing interest rate. The first two agents are the same as earlier. The third agent has an endowment of 20 in the first period and consumes 15 in the second period. If the first two agents each consumed 21 units in the first period, how much did the third agent consume in the first period? Plz do fast
- What is the likelihood that firms would enter the market in the short-run? Use COVID-19 as a market condition to elaborate the likelihood and further elaborate an exit strategy if one exists.A small college is trying to predict enrolment for the next academic year. The vice president for business states that enrolment has tended to follow a pattern described by E = 18,000 – 0.5P, where E denotes total enrolment and P is yearly tuition. a) If the school sets tuition at €20,000, how many students can it expect to enrol? b) If the school wants to maximize total tuition revenue, what tuition should it charge? c) As the vice president for business, what tuition would you recommend? Explain briefly. d) Due to a strong post-COVID-19 recovery, the income conditions in the region improve substantially. Explain in one sentence how this could affect the college’s enrolment pattern and the enrolment level maximizing its tuition revenue.Question Recently, the owner of KFC Franchise decided to change how she compensated hertop manager. Last year, the manager received a fixed salary of GHC50,000 and KFCmade GHC110,000 in profits (excluding the manager’s compensation). She fearedthat her store’s performance was connected to the top manager shirking on the joband expected that changes to her top manager’s compensation structure wouldimprove sales. Therefore, this year she decided to offer him a fixed salary of $40,000plus 5 percent of the store’s profit. Since the change, the store is performing muchbetter, and she forecasts profits this year to be $300,000 (again, excluding themanager’s compensation). Assuming the change of compensation is the reason for the increased profits, and the forecast is accurate, how much more money will theowner make (net of payment to her top manager) because of this change?Does the manager make more money under the new payment scheme?
- Which firm would you expect to have the highest share price?i. A profit-maximiserii. A revenue-maximiseriii. A managerial utility maximiser. Explain the differences between the neoclassical cost theory and the Xinefficiency theoryof the firm.Bruce and Eve currently live in Tulsa. Bruce currently earns $30,000 per year while Eve earns $40,000 per year. Bruce has family in Tulsa, so he has a higher moving cost ($25,000) than Eve ($10,000). Let’s assume that each person lives for 4 periods and have the same discount rate (0.1). (a) Calculate Bruce and Eve’s present value of earnings if they both stay in Tulsa. (b) Recently, Bruce received a job offer in Denver earning $40,000 while Eve got a job offer for $50,000. (1) Would Bruce move if he were single? Explain your reasoning. (2) Would Eve move if she were single? Explain your reasoning. (3) Will they move as a married couple? Explain your reasoning. (c) Suppose that Bruce and Eve only live for two periods now. Re-do part b. Explain why youranswers changed.Suppose that you decide to play a game. You buy stockby throwing a dice a few times, using that method toselect which stock to buy. After ten months you calculate the return on your investment and the return earned bysomeone who followed “expert” advice during the sameperiod. If both returns are similar, would this constitute evidence in favor of or against the efficient markethypothesis?