DecisionAlternativeProduce pilot,d₁Sell tocompetitor,d₂Reject,81-100100State of Nature1 Year, 82501002 Years,83150100 The probabilities for the states of nature are P(8₁) = 0.20,P(82) = 0.30, and P(83) = 0.50 . For a consulting fee of $5000, anagency will review the plans for the comedy series and indicate theoverall chances of a favorable network reaction to the series. Assumethat the agency review will result in a favorable (F) or an unfavorable(U) review and that the following probabilities are relevant:P(F) = 0.69P(U) = 0.31P($1F) = 0.09P(82|F) = 0.26P(83| F) = 0.65P($₁|U) = 0.45P(82|U) = 0.39P(83|U) = 0.16

The objective of the question is to determine the best decision alternative based on the given…

Answered: Decision Alternative Produce pilot, d₁…

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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Problem #2 Lebanon Metal Company (LMC), a manufacturer of various metal parts, must decide whether to enter the competition to become the supplier of transmission housings for Gulf Electric, a company that produces the housings in its own in-house manufacturing To compete, LMC must purchase a new forge that will cost $ 1 50,000. If LMC gets the order, it may be able to sell as many as 3,000 units per year to Gulf Electric for $60 each, and costs will be $15 per unit. The firm expects that the project will have about five-year product life. The firm also estimates that the amount ordered by Gulf Electric in the first year will be ordered in each of the subsequent four years. The initial investment can be depreciated on a MACRS-GDS basis over a 5-year period, and the tax-rate is expected to remain 40%. At the end of five years, the forge is expected to retain a market value of $50,000 at the end of year 5. LMC's before tax MARR is 15% per year.
The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, "Given a choice, I will always prefer a $50,000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50,000 on a supposedly better accounting system?" Question: How should the controller respond?
The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, “Given a choice, I will always prefer a $50,000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50,000 on a supposedly better accounting system?” How should the controller respond?

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