What price should you charge for a midsized automobile

Reference no: EM131134902

Question 1:

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 Corporate Finance 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 $70,000, while 90 percent demand a salary of $100,000. 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 $900. In addition, it costs a total of $4,900 in travel expenses to interview each candidate.

You are very impressed with the first interviewee completing both phases of BK Books's interviewing process, and she has indicated that her reservation salary is $100,000.

Should you make her an offer at that salary or continue the interviewing process? Explain.

Question 2:

A risk-neutral consumer is deciding whether to purchase a homogeneous product from one of two firms. One firm produces an unreliable produces an unreliable product and the other a reliable product. At the time of the sale, the consumer is unable to distinguish between the two firms' products. From the consumer's perspective, there is an equal chance that a given firm's product is reliable or unreliable. The maximum amount this consumer will pay for an unreliable product is $0, while she will pay $100 for a reliable product.

a. Given this uncertainty, what is the most this consumer will pay to purchase one unit of this product?

b. How much will this consumer be willing to pay for the product if the firm offering the reliable product includes a warranty that will protect the consumer? Explain.

Question 3:

You are the owner of a local Honda dealership. Unlike other dealerships in the area, you take pride in your "No Haggle" sales policy. Last year, your dealership earned record profits of $1.5 million. In your market, you compete against two other dealers, and the market-level price elasticity of demand for midsized Honda automobiles is -1.3. In each of the last five years, your dealership has sold more midsized automobiles than any other Honda dealership in the nation. This entitled your dealership to an additional 20 percent off the manufacturer's suggested retail price (MSRP) in each year. Taking this into account, your marginal cost of a midsized automobile is $12,000.

What price should you charge for a midsized automobile if you expect to maintain your record sales?

Question 4:

The American Baker's Association reports that annual sales of bakery goods last year rose 15 percent, driven by a 50 percent increase in the demand for bran muffins. Most of the increase was attributed to a report that diets rich in bran help prevent certain types of cancer. You are the manager of a bakery that produces and packages gourmet bran muffins, and you currently sell bran muffins in packages of three. However, as a result of this new report, a typical consumer's inverse demand for your bran muffins is now P = 8 - 1.5Q.

If your cost of producing bran muffins is C(Q) = .5Q, determine the optimal number of bran muffins to sell in a single package and the optimal package price.

Reference no: EM131134902

Questions Cloud

Derive and graph foreign''s export supply curve : Calculate the effects on the price in each country and on welfare, both of individual groups and of the economy as a whole, in both countries.

Which is the written statement of facts : Which is the written statement of facts, made voluntarily by the person or party making the statement and taken before an authorized party?

Determine the free trade equilibrium : Determine the free trade equilibrium. Then calculate and graph the following effects of an import quota that limits imports to 50 bags.

Do you think finance departments are the best place to train : Do you think finance departments are the best place to train future CEOs? Provide two actual examples of CFOs of publicly-traded companies who became CEOs of publicly-traded companies within the past 5 years.

What price should you charge for a midsized automobile : Should you make her an offer at that salary or continue the interviewing process - How much will this consumer be willing to pay for the product if the firm offering the reliable product includes a warranty that will protect the consumer? Explain.

Define system of document transfer : Define system of document transfer whereby funds, a deed or bond is delivered to a third party to hold until all considerations set forth in a contract are fulfilled.

What is the most recent price of the shares on the company : This rate of return is called the one-year Holding Period Return, or HPR. Also state what is the most recent price of the shares on the company?

Explain the kinetics of bacterial growth during experiment : Explain the kinetics of bacterial growth during the experiment. Account for the rapid rate of initial growth, the slower rate of final growth, and the delay in growth in the middle of the experiment

Promise that explicitly made regarding transfer of property : a promise that is explicitly made regarding a transfer of property or rights- a promise about the goods or rights transferred.

User Account

All Pages