Which of the following statements concerning models of product differentiation, if any, are correct?
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The more new products draw their customers from those who currently are buying existing products in the same market, the more likely we have too much product variety from the point of view of efficiency. |
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The more new products draw their customers from those who currently are not buying existing products in the market in question (new customers to the market), the more likely we have too much product variety from the point of view of efficiency. |
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Models of product differentiation do not address the question of the efficiency of product variety. |
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The more new products draw their customers from those who currently are buying existing products in the same market, the more likely we have too little product variety from the point of view of efficiency. |
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The more new products draw their customers from those who currently are not buying existing products in the market in question (new customers to the market), the more likely we have too little product variety from the point of view of efficiency. |
In: Economics
Randy Company is thinking about extending trade credit to new customers. This will increase the annual sales by $400,000 if credit is extended to these customers. Of the new accounts receivable related to these sales, 10% will be uncollectible. Additional collection costs will be 8% of sales. Besides, production and selling costs will be 85% of sales. The company is in a 40% tax bracket.
16. What is the amount of additional collection costs? *
a-$32,000
b- $40,000
c- $340,000
d- $400,000
e- None of the above
17. What is the profit on the new sales? *
a- $7,200
b- $12,000
c- $30,000
d- $400,000
e- None of the above
18. What is the percentage return on the new sales? *
a- 1.80%
b- 3%
c- 7.50%
d- 10%
e- None of the above
19. What is the amount of the new investment in accounts receivable if the accounts receivable are turned over 5 times a year? *
a- $40,000
b- $68,000
c- $80,000
d- $400,000
e- None of the above
20. What is the return on investment, assuming that the only new investment will be in accounts receivable? *
a- 9%
b- 10%
c- 15%
d- 30%
e- None of the above
In: Accounting
Company Y's management is evaluating a piece of machinery that costs $1.5 million. This machine will replace an existing, old machine that is fully depreciated (book value is zero) and could be sold today for $500,000. The old machine could continue operating for another 10 years at which time it would have no salvage value.
The new machine has the same production capacity as the old machine, but operating costs will be lower each year by $200,000. The new machine will require an additional $100,000 in increased working inventory for its operations. The new machine is expected to have a life of 10 years. It is to be depreciated fully (down to zero) over ten years, using the straight line method. It will have no salvage value at the end of 10 years.
Company Y is profitable and expects to continue paying taxes at 35%.
6. The time-zero cash flow from replacing the old machine with the new machine is a net outflow of
7. The recurring annual cash flow from replacing the old machine with the new machine is a net inflow of
8. In addition to the recurring annual cash flow, if we replace the old machine with the new one then in year 10 there is incremental inflow of
In: Finance
Ecology Labs Inc. will pay a dividend of $3.75 per share in the
next 12 months (D1). The required rate of
return (Ke) is 16 percent and the constant
growth rate is 6 percent. (Each question is independent of
the others.)
a. Compute the price of Ecology Labs' common
stock. (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
price:
b. Assume Ke, the required
rate of return, goes up to 19 percent. What will be the new price?
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)
new price:
c. Assume the growth rate (g) goes up to
10 percent. What will be the new price? Ke goes
back to its original value of 16 percent. (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
new price:
d. Assume D1 is $5.00. What
will be the new price? Assume Ke is at
its original value of 16 percent and g goes back to its original
value of 6 percent. (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
new price:
In: Finance
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The Wrigley Company, manufacturer of Skittles brand fruit candies, is considering adding a new flavor to the "rainbow" of flavors in a Skittles bag: passion peach. To test if America will like the new flavor, Skittles will do a taste test random sample of size n = 140 at a Peoria grocery store. In all of the other taste tests done so far in the United States in other markets, the proportion of the population who like the new flavor = 0.69. Use Table 1. |
| a. |
Calculate the expected value and the standard error for the sampling distribution of the sample proportion of tasters in Peoria who will like the new flavor. (Round "expected value" to 2 decimal places and "standard deviation" to 4 decimal places.) |
| Expected value = .69 | |
| Standard error = .0391 | |
| b. |
What is the probability that the sample proportion of the tasters in Peoria who like the new flavor is between 0.60 and 0.80? (Round final answer to 4 decimal places.) |
| Probability |
| c. |
What is the probability that the sample proportion or the tasters in Peoria who like the new flavor is less than 0.60? (Round final answer to 4 decimal places.) |
| Probability |
In: Statistics and Probability
A pharmaceutical company claims that its new drug reduces systolic blood pressure. The systolic blood pressure (in millimeters of mercury) for nine patients before taking the new drug and 2 hours after taking the drug are shown in the table below. Using this data, find the 99% confidence interval for the true difference in blood pressure for each patient after taking the new drug. Assume that the blood pressures are normally distributed for the population of patients both before and after taking the new drug. Patient 1 2 3 4 5 6 7 8 9 Blood pressure (before) 187 186 176 203 182 168 199 167 204 Blood pressure (after) 178 166 158 187 157 159 192 148 196 Step 1 of 4 : Find the point estimate for the population mean of the paired differences. Let x1 be the blood pressure before taking the new drug and x2 be the blood pressure after taking the new drug and use the formula d=x2−x1 to calculate the paired differences. Round your answer to one decimal place.
In: Statistics and Probability
Answer all questions. Showing your work may earn you partial credit.
Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $200,000 per year if credit is extended to these new customers. Of the new accounts receivable generated, 6% are projected to be uncollectible. Additional collection costs are projected to be 5% of incremental sales, and production and selling costs are projected to be 78% of sales. Your firm expects to pay a total of 30% of its income after expenses in taxes.
In: Finance
RDH, Inc., manufactures high quality ladies boots. The company is considering the launch of a new boot style. Given the company’s history, it believes that it can sell 34,000, 27,000, 24,000, and 18,000 pair of boots per year for the next 4 years, respectively. The new boots would have variable costs of $134 per pair. Fixed production costs are $4.25 million per year and the equipment necessary for the new line costs $7.8 million. The equipment will be depreciated on a 5-year MACRS schedule. The line would require an investment in NWC of 15 percent of sales to be stockpiled one year ahead of sales, the tax rate is 40 percent, and the required return is 9 percent. The company expects that because of changes in styles, the new design can only be sold for the next four years. In four years, the equipment can be sold for $1.8 million, although the company believes it will keep the machinery for another product line. Additionally, the CEO has stated that she requires an NPV of $250,000 to undertake the new line of boots. What is the price per pair of boots that the company must set in order to undertake the new boot?
In: Finance
Travelocity would like to test if the standard deviation for roundtrip airfares between New York and London is less than $200. A random sample of 22 roundtrip airfares between New York and London had a standard deviation of $142. Using a = 0.05, the conclusion for this hypothesis test would be that because the test statistic is
A) less than the critical value, we fail to reject the null hypothesis and cannot conclude that the standard deviation for the roundtrip airfares between New York and London is less than $200.
B) more than the critical value, we can reject the null hypothesis and conclude that the standard deviation for the roundtrip airfares between New York and London is less than $200.
C) more than the critical value, we fail to reject the null hypothesis and cannot conclude that the standard deviation for the roundtrip airfares between New York and London is less than $200.
D) less than the critical value, we can reject the null hypothesis and conclude that the standard deviation for the roundtrip airfares between New York and London is less than $200.
Please write down the steps clearly, thank you in advance
In: Statistics and Probability
Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $150,000 per year if credit is extended to these new customers. Of the new accounts receivable generated, 7% are projected to be uncollectible. Additional collection costs are projected to be 3% of incremental sales (whether they actually end up collected or not), and production and selling costs are projected to be 80% of sales. Your firm expects to pay a total of 40% of its income after expenses in taxes.
1) Compute the incremental income after taxes that would result from these projections:
2) Compute the incremental Return on Sales if these new credit customers are accepted: If the receivable turnover ratio is expected to be 3 to 1 and no other asset buildup is needed to serve the new customers…
3) Compute the additional investment in Accounts Receivable
4) Compute the incremental Return on New Investment
5) If your company requires a 20% Rate of Return on Investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers? Explain.
In: Finance