Chapter 3 and Chapter 4

Honda Motor Company is considering offering a $1,000 rebate on its minivan, lowering the vehicle's price from $31,000 to $30,000. The marketing group estimates that this rebate will increase sales over the next year from 25,000 to 29,000 vehicles. Suppose Honda's profit margin with the rebels is 15.000 per vetide What will be the benefit of the rebate? A. $24 million B. $25 million OC. $5 million OD. $20 million

A chain of take-away pizza stores is considering introducing a new line of gluten-free pizzas.  Net revenue from the new line of pizzas is expected to total $500,000 per year, but 15% of this net revenue is forecast to consist of people switching from the regular pizzas to the gluten-free pizzas. How would you describe this situation in terms of the NPV analysis upon which the situation will be based. Question 1Answer a. There is a negative externality equal to $425,000 which should be included in the NPV analysis for the gluten-free pizza project. b. There is a positive externality equal to $425,000 which should be included in the NPV analysis for the gluten-free pizza project. c. There is a positive externality equal to $75,000 which should be included in the NPV analysis for the gluten-free pizza project. d. There is a negative externality equal to $75,000 which should be included in the NPV analysis for the gluten-free pizza project.

Honda Motor Company is considering offering a $2,000 rebate on its minivan, lowering the vehicle's price from $29,700 to $27,700. The marketing group estimates that this rebate will increase sales over the next year from 40,400 to 54,700 vehicles. Suppose Honda's profit margin with the rebate is $5,240 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.)

Honda Motor Company is considering offering a $2,100 rebate on its​ minivan, lowering the​ vehicle's price from $29,700 to $27,600. The marketing group estimates that this rebate will increase sales over the next year from 42,000 to 55,400 vehicles. Suppose​ Honda's profit margin with the rebate is $6,600 per vehicle. If the change in sales is the only consequence of this​ decision, what are its costs and​ benefits? Is it a good​ idea?​ Hint: View this question in terms of incremental profits.

Honda Motor Company is considering offering a $1,800 rebate on its minivan, lowering the vehicle's price from $31,000 to $29,200. The marketing group estimates that this rebate will increase sales over the next year from 41,000 to 55,200 vehicles. Suppose Honda's profit margin with the rebate is $5,380 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) The benefit of the rebate will be $ million. (Round to one decimal place.) Is it a good idea? (Select from the drop-down menu.) Offering the rebate V look attractive.

H5. Pipe Manufacturing Company (PMC) is debating whether to extend Credit to a particular customer. PMC’s products, primarily used in the manufactured assembly of Motor Vehicles, currently sell for sh. 1,850 per unit. The variable cost is sh. 1,200 per unit. The order under consideration is 12 units today; payment is promised in 30 days.   Required:-   (i) If there is a 20% chance of default, should PMC fill the order? The required return is 2% per month. This is a One-Time Sale, and the customer will not buy if credit is not extended.   (ii) In general terms, how do you think your answer in Part (a) will be affected if the customer will purchase the Merchandise for cash if the credit is refused? The Cash Price is sh. 1,750 per unit.    Show proper step by step calculation

Problem 3. Regent Rug Repair Company is trying to decide whether it should relax its credit standards. The firm repairs  rugs per year at an average price of  each. Bad debt expenses are  of sales, the average collection period is  days, and the variable cost per unit is . Regent expects that if it does relax its credit standards, the average collection period will increase to  days and that bad debts will increase to  of sales. Sales will increase by  repairs per year. If the firm has a required rate of return on equal-risk investments of , what recommendation would you give the firm? Use your analysis to justify your answer (use a 365-day year)

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4. What is a Break-even Point and why do managers calculate it? 5. Branton Electric is considering the purchase of an entire cargo container filled with upgraded utility meters for $20,000. Branton can charge $50 for the installation of each upgraded meter, while the actual cost of the installation would be only $15. How many utility meter upgrades are necessary for Branton Electric to break even on this purchase? (Quick Start #16) 6. What are the advantages and disadvantages of using a conservative strategy of Capacity versus an Aggressive strategy?

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3. A delivery company is looking at converting their fleet of gasoline vans to electric vehicles. The all electric vans cost $75,000.00 today, minus an electric vehicle tax credit $7,500.00 and the reduced maintenance and fuel cost of $5,000. This brings today's MRC to $62,500.00 for each new electric van. The newer vans are expected to increase future MRP by $12,000.00 each year and have a productive life for five years. At the end of the fifth year, the firm expects to sell the used vans for a salvage value of $30,000.00. This firm is borrow- ing funds at 6% interest. The table indicates the possible investment for one electric vehicle. Year 1 2 3 4 5 Total V Total V Future Value Present Value Discount Factor

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5

Alberta Ltd. is considering the purchase of new machinery which costs $147,800. The machine is expected to save $42, 300 in operating costs annually for the next 7 years. By how much can the annual cost savings fall (to the nearest hundred dollars) and still provide a 16% return? Ignore income taxes. Question 5 options: $36,600 $42,300 $0 $5,700 $21,200

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7.4 q1 A chain of take-away pizza stores is considering introducing a new line of gluten-free pizzas.  Net revenue from the new line of pizzas is expected to total $400,000 per year, but 20% of this net revenue is forecast to consist of people switching from the regular pizzas to the gluten-free pizzas. How would you describe this situation in terms of the NPV analysis upon which the situation will be based. a. There is a negative externality equal to $80,000 which should be included in the NPV analysis for the gluten-free pizza project. b. There is a positive externality equal to $80,000 which should be included in the NPV analysis for the gluten-free pizza project. c. There is a negative externality equal to $320,000 which should be included in the NPV analysis for the gluten-free pizza project. d. There is a positive externality equal to $320,000 which should be included in the NPV analysis for the gluten-free pizza project.

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6. Homes-R-Us is offering free credit on a new $200,000 home. You pay $40,000 down and then $16,000 a year for the next 10 years. We-Build'em-Better does not offer free credit but will give you $40,000 off the list price. a. If the discount rate is 5% per year, which company is offering the better deal? b. If the discount rate is 8% per year, which company is offering the better deal? Compare your answers to (a) and (b). Why do you think you are getting those results? c.