Two competitors with very similar offerings currently have 20% and 15% market share respectively. The totalmarket is of about 1,000,000 units per year. Currently, both competitors charge in average $10 per unit. Thecompetitor with the lower market share decides to conquer more of the market and drops the price to $8,with the intent to capture 18% of the market. Is this wise? What is the long term impact on revenue for bothcompanies, given that due to the similarity of their products, it is likely that any gain in market share will becoming from the other close competitor?

The competitor with 15% market share plans to drop its price to $8 in an attempt to capture 18% of…

Answered: Two competitors with very similar…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Sampson Corporation is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are shown next: Possible Market Reaction Low response Moderate response High response Very high response Sales in Units 40 Probabilities 0.30 70 0.20 90 120 0.20 0.30 a. What is the expected value of unit sales for the new product? Note: Do not round Intermediate calculations and round your answer to the nearest whole unit.) Answer is complete but not entirely correct. Expected value 70 units b. What is the standard deviation of unit sales? Note: Do not round Intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Standard deviation 19.24 units
Rose Trading had RM210,000 of net profit in year 2021 when the selling price per unit was RM150, the variable costs per unit were RM90, and the fixed costs were RM570,000. Management expects per unit data and total fixed costs to remain the same in year 2022. The manager of Rose Trading is under pressure from investors to increase net profit by RM52,000 in year 2022.Required:(iii) Assume that Rose Trading sells the same number of units in year 2022 as it did in year 2021. What would the selling price have to be to reach the shareholders’ desired profit level?(iv) Assuming actual sales in year 2022 are 16,000 units with the new selling price as computed in (c), compute the margin of safety in (i) units and (ii) as a ratio. Briefly explain your findings. (Tips: Interpret about margin of safety)
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