Construction company C and landlord L negotiate to build an office building for occupancy on September 1. Landlord L wants to sign up commercial renters to occupy the building on September 1. Unforeseeable causes often delay construction projects. C is willing to take this risk. C proposes a price of S10 million and a liquidation clause requiring C to pay L $1,500 per day for completing the building late. You are a lawyer hired by L to help on the contract. L tells you in private that he will actually lose $1,000 per day of delay, not $1,500 per day. How would you explain to L that he might benefit from proposing to reduce liquidated damages from S1,500 to $1,000 per day?

Construction company C and landlord L negotiate to build an office building for occupancy on September 1. Landlord L wants to sign up commercial renters to occupy the building on September 1. Unforeseeable causes often delay construction projects. C is willing to take this risk. C proposes a price of S10 million and a liquidation clause requiring C to pay L $1,500 per day for completing the building late. You are a lawyer hired by L to help on the contract. L tells you in private that he will actually lose $1,000 per day of delay, not $1,500 per day. How would you explain to L that he might benefit from proposing to reduce liquidated damages from S1,500 to $1,000 per day?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 14E

See similar textbooks

Similar questions

Problem 5-4A (Algo) Lexington is the payroll accountant at All's Fair Gifts. The employees of All's Fair Gifts are paid semimonthly. Asa comes to Lexington on April 7 and requests a pay advance of $1,000, which Asa will pay back in equal parts on the April 14 and May 15 paychecks. Asa is single, with one dependent under 17, is paid $58,800 per year, contributes 3 percent of gross pay to a 401(k), and has $136 per paycheck deducted for a Section 125 plan. Required: Compute the net pay on Asa's April 14 paycheck. The applicable state income tax rate is 5.25 percent. Use the wage-bracket method for manual payroll systems with Forms W-4 from 2020 or later in Appendix C to determine the federal income tax. Assume box 2 is not checked. Note: Round your intermediate calculations and final answer to 2 decimal places. Net pay
The Rosebud Motel is a must-stay for any road-tripper or weary traveler. The motel fils each of its 24 rooms for 200 nights each during the year. Annual fixed costs total $160,000. The variable cost of one night's stay is $100. The motel owners expect a 50% return on the company's $500,000 of assets each year. The Rosebud Motel is currently the only place to stay for 50 miles. What should Rosebud's cost-plus price be if sales volume and costs are expected to stay consistent? OA. $133.33 OB. $185.42 OC. $2,150.00 OD. $152.08 OE. The Rosebud Motel would not set its price as it is a price-taker in this market.
A diesel refinery is upstream of an industrial farm. The runoff from the refinery pollutes the river and damages the crops. The farm earns $499 using the polluted water, but would earn $628 if it were clean. The refinery earns $1772 but would only earn $1607 if it had to divert resources to prevent the runoff. There are no environmental laws. Assume that a scrubbing machine that would prevent the runoff costs $24 plus an installation cost. What is the most that installation could cost for clean water to be the socially optimal outcome achieved through private bargaining? O a. $141.00 O b. $36.00 O c. Anything, the machine is not required as clean water will already be achieved. O d. $105.00 O e. $165
You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin' Bobby." You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and will be depreciated straight-line over a 5-year period to a zero salvage value, your marginal tax rate is 32 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product?
You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin' Bobby." You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 16 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Opportunity cost
Bose will incur fixed costs of $200,000 and unit variable costs of $25 on its new wireless Bluetooth shower speaker. Bose plans to price the speaker at $750. To break-even, Bose must sell _____ units.
Manchester United TV Subscription (annual) Value to a non-Manchester United soccer fan Basic Package $30 $40 Deluxe Package Value to Manchester United fans $120 $200 The table above shows how much the a non-Manchester United fan and a Manchester United fan would pay for an annual subscription to Manchester United TV. The marketing team at Manchester United decides to offer two packages: a basic package that includes all games of the main, youth and women's teams (delayed by one day) and a deluxe package that includes the games (delayed by one day), recording of games from past seasons, and exclusive player interviews. Because there are many more non-Manchester United fans, the marketing team decides to offer the basic package for $30 to attract these fans. What is the maximum price they can charge for the deluxe package if they want Manchester United fans to subscribe to the deluxe package rather than also subscribing to the basic package.
Help Save Suppose a corporation has two subsidiaries, one of which is unregulated and sells all of its output to the other, regulated subsidiary. Permitted profits at the regulated subsidiary are equal to 10 percent of total costs. The initial profit picture for the subsidiaries is provided in the table below: Unregulated Subsidiary Regulated Subsidiary Total $ 650,000 N/A revenue $ 350,000 $300,000 $1,000,000 $ 100,000 Total costs Total profit If the unregulated subsidiary doubles its selling price to the regulated subsidiary, what are the new profits at Instructions: Enter your responses as a whole number. (a) The unregulated subsidiary? profit = $ (b) The regulated subsidiary? profit = $ & 23 24 8. *00 w/ %S4
5. You are employed as a research and development manager for a production company. The chief executive officer of the company has asked you to generate costing data to better assist in expansionaryplanning for the company. You are required to generate costs data from the equation below. C(y) = 23y2 + 12y + 8 assume 10 < y ≤ 30Calculate each cost for (a)-(f) in terms of $ values based on your selected (y) and provide a graphical representation of all cost curves from (a)-(f) on one graph. Please note that the graph need not to be drawn to scale but all curves should be labeled clearly.(a) variable costs;(b) fixed costs;(c) average variable costs;(d) average fixed costs;(e) average total cost;(f) marginal costs. 6. Optimize the Cobb-Douglas production function given the following parameters. The maximum about of money available to spend is $1, 600 where the price of K = 12 and the price of L = 6. That is Pk = 12 and Pl = 6. The function is given as q = K0.4L0.6. Using the Lagrangian…
While studying for the engineering economy final exam, you and two friends find yourselves craving a fresh pizza. You can’t spare the time to pick up the pizza and must have it delivered. “Pick-Up-Sticks” offers a 1-1/4-inch-thick (including toppings), 20-inch square pizza with your choice of two toppings for $15 plus 5% sales tax and a $1.50 delivery charge (no sales tax on delivery charge). “Fred’s” offers the round, deep-dish Sasquatch, which is 20 inches in diameter. It is 1-3/4 inches thick, includes two toppings, and costs $17.25 plus 5% sales tax and free delivery. Solve, a. What is the problem in this situation? Please state it in an explicit and precise manner. b. Systematically apply the seven principles of engineering economy (pp. 3–6) to the problem you have defined in Part (a). c. Assuming that your common unit of measure is dollars (i.e., cost), what is the better value for getting a pizza based on the criterion of minimizing cost per unitof volume? d. What other…
Kieron is currently working as an automobile detailer who earns $45,000/year. He currently has living costs of $30,000/year. Kieron has recently received a job offer interstate which offers $50,000 per year, where he expects his living costs to be $33,000/year. Select the item from the list provided to make the following statements true. By choosing to stay in his current job, Kieron is making a / an 1. Accounting profit 2. -$2000/year 3. Total cost Kieron's economic profit/loss by choosing to remain in his current job is Kieron's explicit cost if he chose to take the job offer interstate would be 4. Economic profit 5. Economic loss 6. A normal profit 7. $12000/year 8. $33000/year 9. Explicit cost 10. $45000/year 11. $1900 12. Implicit cost
A local builder offers to place with you insurance on every house he/she builds while it is under construction. In return, he/she wants you to allow him/her 20% discount off the premium required by insurers. How would you respond to comply with RIBO Regulations? OA) You can only allow a five percent (5%) discount because of your overhead and expenses. OB) You will pay the builder a flat $10.00 fee for each house, but it is contrary to RIBO Regulations to discount the premium. OC) You refuse to pay the builder anything, since it would contravene RIBO Regulations. OD) You offer the builder a 20% premium refund for those houses that have no claims while under construction.