There are 4 firms: A, B, C and F. They want to form a joint venture...

There are 4 firms: A, B, C and F. They want to form a joint venture (JV). The returns of the JV are as follows:

- If all the firms form a JV, the JV earns $100m

- The JV of A, B and C earns $100m

- The JV of A, B and F earns $80m

- The JV of A, C and F earns $70m

- The JV of B, C and F earns $100m

- The JV of A and B earns $80m

- The JV of A and C earns $70m

- The JV of A and F earns $30m

- The JV of B and C earns $40m

- The JV of B and F earns $80m

- The JV of C and F earns $70m

- Anyone not in a JV earns $15m

The profit of a JV must be split (not necessarily evenly) among the participating firms. Assume that firms only care about their own returns, and a firm cannot be part of more than one JV. What do you predict will happen? Who will form JV, and who will get how much of the returns?

Solutions

Expert Solution

So in all there are 11 scenarios to form a JV. We start eliminating the scenarios where other scenarios are more beneficial then the eliminated scenario.

Option 2 is better than Option 1, as taking F does not bring any value addition as compared to option 2. So 1 is eliminated
Option 6 is better than Option 3, as taking F does not bring any value addition comparing option 3 &6. So 3 is eliminated
Option 7 is better than Option 4, as taking F does not bring any value addition comparing option 4 &7. So 4 is eliminated
Now comparing option 6 & 10, B has an option to join hands with either A or F. B will prefer F as A has more demand and will ask a higher return unlike F. So partnership of B& F is finalised. What will be the return expected by F. F will be getting minimum 30 return using option 10. So B will have to give 35 to F using option 6 and he will receive balance 55.
Now since A & C are left, they will form JV using option 7. They will mostly share profits equally as there is no other option left through which they can get higher profit then 35 (70/2) . If they form no JV they will earn 15. Hence both has equal need of each other hence share profits equally.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A group of investors are intending to form a joint venture business in order to produce...

A group of investors are intending to form a joint venture business in order to produce genetically modified food products for domestic as well as export markets. based on PESTEL analysis, briefly but precisely discuss how those external factors will affect their business activities and performances.

Anchalee, Bancha and Chamni form a joint venture for the sale of merchandise. Anchalee and Bancha...

Anchalee, Bancha and Chamni form a joint venture for the sale of merchandise. Anchalee and Bancha are to contribute the merchandise and Chamni is to act a managing partner as well as sales manager and is to be allowed a commission of 2% of gross sales. Anchalee and Bancha are to be allowed 12% a year on their original investments and the balance of any profit on the venture is to be divided equally. On January 1, Anchalee and Bancha...

1. If f(x) = ln(x/4) -(a) Compute Taylor series for f at c = 4 -(b)...

1. If f(x) = ln(x/4) -(a) Compute Taylor series for f at c = 4 -(b) Use Taylor series truncated after n-th term to compute f(8/3) for n = 1,.....5 -(c) Compare the values from above with the values of f(8/3) and plot the errors as a function of n -(d) Show that Taylor series for f(x) = ln(x/4) at c = 4 represents the function f for x element [4,5]

Your choices are: a. Sole Proprietorship b. Joint Venture c. Partnership d. Limited Partnership e. Limited Liability

Your choices are: a. Sole Proprietorship b. Joint Venture c. Partnership d. Limited Partnership e. Limited Liability Company f. Corporation Freda is a stay-at-home mom whose youngest child just started first grade. Freda would like to earn extra money while her kids are at school. She wants a flexible schedule because she likes being available to volunteer at the school when needed. While searching the Internet, Freda discovers Sugar-Girl, a cosmetic company that will sell her cosmetics at a reduced rate and allow her to resell...

Harry, Ron and Hermione are friends and want to form a business venture. Harry is rich....

Harry, Ron and Hermione are friends and want to form a business venture. Harry is rich. Ron has a business degree. Hermione is a scientist who has developed a process that will, according to her, “revolutionize hair care.” Harry, Ron, and Hermione believe it is in their best interest to form a general partnership. What do you think? Is there a more appropriate form of business you might recommend? Be sure to consider each person individually.

Give examples of companies who have form contractual alliances, equity alliances, and a joint venture.

a)Find the value or values of c that satisfy the equation f(b)-f(a)/b-a = f′(c)in the conclusion...

a)Find the value or values of c that satisfy the equation f(b)-f(a)/b-a = f′(c)in the conclusion of the Mean Value Theorem for the function and interval. Round to the nearest thousandth. f(x) ln(x-3), [4,7] b)Suppose that c(x)=3x^3-40x^2+6844x is the cost of manufacturing x items. Find a production level that will minimize the average cost of making x items. c)A rectangular field is to be enclosed on four sides with a fence. Fencing costs $6 per foot for two opposite sides,...

A for joint venture with B, purchased goods costing Rs. 2,00,000. B sold the goods for Rs. 2,80,000

A for joint venture with B, purchased goods costing Rs. 2,00,000. B sold the goods for Rs. 2,80,000. Unsold material costing Rs. 10,000 was taken over by A at Rs. 8,000. A is entitled to get 1% commission on purchases. B is entitled to get 2% commission on sales, profit on venture will be:A) Rs. 80,000B) Rs. 80,800C) Rs. 81,200D) Rs. 80,400

Q.7 : A and B entered into joint venture. A supplied goods worth Rs. 7,000 and...

Q.7 : A and B entered into joint venture. A supplied goods worth Rs. 7,000 and incurred expenses of Rs. 300. B sold the goods for Rs. 10,000 and incurred expenses of Rs. 500. What is the amount of final remittance? A) Rs. 8,400 B) Rs. 7,900 C) Rs. 8,900 D) None of these Q.8 : M and N enter into a joint venture where M supplies goods worth Rs. 6000 and spends Rs. 300 on expenses. N sells the...

1. ¬B∨(G↔J), H→(B&C) ∴(H&J)→G 2. A∨B, C↔¬(B∨D) ∴C→A 3. (A&B) ↔ (F→G), (A&F) & B∴(G→R)→R 4....

1. ¬B∨(G↔J), H→(B&C) ∴(H&J)→G 2. A∨B, C↔¬(B∨D) ∴C→A 3. (A&B) ↔ (F→G), (A&F) & B∴(G→R)→R 4. T→¬B, T→¬D ∴ T→¬(B∨D) 5. ¬(M∨¬S), S→(R→M) ∴A → (¬R∨T) 6. (F&G) → I, (I∨J) → K ∴F→(G→K) 7. ¬U, O→G, ¬(O∨G) →U ∴G Prove that the arguments are valid by constructing a dedication using the rules MP, MT, DN, Conj, Simp, CS, Disj, DS, DM, CP, HS, BE, and DL. Use CP if needed.

Subjects