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Florentino Allers is the production manager of Electronics Manufacturer. Due to limited capacity, the company can only produce one of two possible products: An industrial motherboard with a 80% probability of making a profit of $1 million and a 20% probability of making a profit of $190,000. • A regular motherboard with a 100% chance of making a profit of $670,000. Florentino will get a 20% bonus from his department. Florentino has the responsibility to choose between the two products and is more of a risk-taker, more so than most of the top management at Electronics Manufacturer. A. Which option is Florentino more likely to choose and why? Florentino will choose the industrial motherboard since he is a risk-taker, and a 80% chance of a $1 million profit is much the $ (even though there is a 20% chance of a $190,000 profit with the industrial motherboard). B. Which option would the company be more likely to choose and why? taker than Florentino, would prefer the regular motherboard because of the certainty of earning $ to offset the While the expected value The company, being a (20% of the industrial motherboard is $ the potential difference of s chance) of only earning $190,000. C. What changes should the company make to Florentino's compensation to avoid unnecessary risks? the salary, thus leveling the playing field when it comes to risk-taking. the size of the bonus and The company should

Florentino Allers is the production manager of Electronics Manufacturer. Due to limited capacity, the company can only produce one of two possible products: An industrial motherboard with a 80% probability of making a profit of $1 million and a 20% probability of making a profit of $190,000. • A regular motherboard with a 100% chance of making a profit of $670,000. Florentino will get a 20% bonus from his department. Florentino has the responsibility to choose between the two products and is more of a risk-taker, more so than most of the top management at Electronics Manufacturer. A. Which option is Florentino more likely to choose and why? Florentino will choose the industrial motherboard since he is a risk-taker, and a 80% chance of a $1 million profit is much the $ (even though there is a 20% chance of a $190,000 profit with the industrial motherboard). B. Which option would the company be more likely to choose and why? taker than Florentino, would prefer the regular motherboard because of the certainty of earning $ to offset the While the expected value The company, being a (20% of the industrial motherboard is $ the potential difference of s chance) of only earning $190,000. C. What changes should the company make to Florentino's compensation to avoid unnecessary risks? the salary, thus leveling the playing field when it comes to risk-taking. the size of the bonus and The company should

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Show Me How Print Item Florentino Allers is the production manager of Electronics Manufacturer. Due to limited capacity, the company can only produce one of two possible products: An industrial motherboard with a 80% probability of making a profit of $1 million and a 20% probability of making a profit of $190,000. A regular motherboard with a 100% chance of making a profit of $670,000. Florentino will get a 20% bonus from his department. Florentino has the responsibility to choose between the two products and is more of a risk-taker, more so than most of the top management at Electronics Manufacturer. A. Which option is Florentino more likely to choose and why? Florentino will choose the industrial motherboard since he is a risk-taker, and a 80% chance of a $1 million profit is much the $ (even though there is a 20% chance of a $190,000 profit with the industrial motherboard). B. Which option would the company be more likely to choose and why? . While the expected value taker than Florentino, would prefer the regular motherboard because of the certainty of earning $ to offset the The company, being a of the industrial motherboard is $ the potential difference of $ is (20% chance) of only earning $190,000. C. What changes should the company make to Florentino's compensation to avoid unnecessary risks? the salary, thus leveling the playing field when it comes to risk-taking. the size of the bonus and The company should
Transcribed Image Text:Show Me How Print Item Florentino Allers is the production manager of Electronics Manufacturer. Due to limited capacity, the company can only produce one of two possible products: An industrial motherboard with a 80% probability of making a profit of $1 million and a 20% probability of making a profit of $190,000. A regular motherboard with a 100% chance of making a profit of $670,000. Florentino will get a 20% bonus from his department. Florentino has the responsibility to choose between the two products and is more of a risk-taker, more so than most of the top management at Electronics Manufacturer. A. Which option is Florentino more likely to choose and why? Florentino will choose the industrial motherboard since he is a risk-taker, and a 80% chance of a $1 million profit is much the $ (even though there is a 20% chance of a $190,000 profit with the industrial motherboard). B. Which option would the company be more likely to choose and why? . While the expected value taker than Florentino, would prefer the regular motherboard because of the certainty of earning $ to offset the The company, being a of the industrial motherboard is $ the potential difference of $ is (20% chance) of only earning $190,000. C. What changes should the company make to Florentino's compensation to avoid unnecessary risks? the salary, thus leveling the playing field when it comes to risk-taking. the size of the bonus and The company should
eBook Print Item Assume Skyler Industries has debt of $4,160,000 with a cost of capital of 7.1% and equity of $6,240,000 with a cost of capital of 10.4%. What is Skyler's weighted average cost of capital? Round your intermediate calculations and final answer to 3 decimal places.
Transcribed Image Text:eBook Print Item Assume Skyler Industries has debt of $4,160,000 with a cost of capital of 7.1% and equity of $6,240,000 with a cost of capital of 10.4%. What is Skyler's weighted average cost of capital? Round your intermediate calculations and final answer to 3 decimal places.
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