CORPORATE FINANCE- ACCESS >C<
12th Edition
ISBN: 9781307447248
Author: Ross
Publisher: MCG/CREATE
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Chapter 7, Problem 7QAP
Summary Introduction
Adequate information:
Cash flow for success (CS) = $1,900,000
Cash flow for failure (CF) = $0
Probability of success when the product goes directly to market = 0.50
Probability of failure when the product goes directly to market = 0.50
Probability of success in case of using the focus group technique = 0.65
Probability of failure in case of using the focus group technique = 0.35
Probability of success in case of using the technique of research of a consulting firm = 0.80
Probability of failure in case of using the technique of research of a consulting firm = 0.20
Cost of conducting research = $345,000
To determine: The action that will result in the highest expected payoff to the firm.
Introduction:
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Instruction: Please answer the following questions. Submit your answers (word file or PDF). Minimum of words are 300 words.
Questions. Describe the positives and negatives for this development project.
FIGURE 2.1 Project Evaluation and Selection Form
EVALUATION CRITERIA
Investment (5)
Return on Investment
Time to Market
Increase in Market Share
PROJECT EVALUATION AND SELECTION
PROJECT A
$700,000
9.1%
10 months.
2%
Risk
Chance of Success
Comments
Project A: Major competitor already has similar product and may reduce price.
Project B New technology may not work as expected.
Project C Product features may not be accepted in some international markets
Low
High
PROJECT B
$2,100,000
18.3%
16 months
5%
High
Medium
PROJECT C
$1,200,000
11.5%
12 months
3%
Medium
High
Susay at day a
You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual net income of $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $44,000. Compute the return on investment for each Fast & Great Burgers alternative. Using return on investment as your only criterion, which location (A or B) should the company open? (The chain currently generates an 22% return on total assets.)
You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to
decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual
net income of $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of
$44,000.
Compute the return on investment for each Fast & Great Burgers alternative. Using return on investment as your only criterion, which
location (A or B) should the company open? (The chain currently generates an 22% return on total assets.)
Complete this question by entering your answers in the tabs below.
Return on
Investment
Choice of
Location
Compute the return on investment for each Fast & Great Burgers alternative.
Return on Investment
1
Location A
Location B
Numerator
Denominator
2 of 3
H
Next >
G
O
Chapter 7 Solutions
CORPORATE FINANCE- ACCESS >C<
Ch. 7 - Forecasting Risk What is forecasting risk? In...Ch. 7 - Sensitivity Analysis and Scenario Analysis What is...Ch. 7 - Prob. 3CQCh. 7 - Break-Even Point As a shareholder of a firm that...Ch. 7 - Prob. 5CQCh. 7 - Real Options Why does traditional NPV analysis...Ch. 7 - Real Options The Mango Republic has just...Ch. 7 - Prob. 8CQCh. 7 - Prob. 9CQCh. 7 - Project Analysis You are discussing a project...
Ch. 7 - Sensitivity Analysis and Break-Even Point We are...Ch. 7 - Prob. 2QAPCh. 7 - Prob. 3QAPCh. 7 - Prob. 4QAPCh. 7 - Prob. 5QAPCh. 7 - Prob. 6QAPCh. 7 - Prob. 7QAPCh. 7 - Prob. 8QAPCh. 7 - Prob. 9QAPCh. 7 - Prob. 10QAPCh. 7 - Prob. 11QAPCh. 7 - Prob. 12QAPCh. 7 - Prob. 13QAPCh. 7 - Prob. 14QAPCh. 7 - Prob. 15QAPCh. 7 - Prob. 16QAPCh. 7 - Prob. 17QAPCh. 7 - Prob. 18QAPCh. 7 - Prob. 19QAPCh. 7 - Prob. 20QAPCh. 7 - Prob. 21QAPCh. 7 - Prob. 22QAPCh. 7 - Prob. 23QAPCh. 7 - Prob. 24QAPCh. 7 - Prob. 25QAPCh. 7 - Prob. 26QAPCh. 7 - Prob. 28QAPCh. 7 - Prob. 29QAPCh. 7 - Prob. 30QAP
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