Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 3, Problem 1P
Honda Motor Company is considering offering a $2000 rebate on its minivan, lowering the vehicle’s price from $30,000 to $28,000. The marketing group estimates that this rebate will increase sales over the next year from 40,000 to 55,000 vehicles. Suppose Honda’s profit margin with the rebate is $6,000 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?
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Honda Motor Company is considering offering a $2,100 rebate on its minivan, lowering the vehicle's price
from $30,100 to $28,000. The marketing group estimates that this rebate will increase sales over the next
year from 41,000 to 53,100 vehicles. Suppose Honda's profit margin with the rebate is $5,190 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 $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.
Honda Motor Company is considering offering a $1,800 rebate on its minivan, lowering the vehicle's price from $29,900 to $28,100. The marketing group estimates that this rebate will increase sales over the next year from 38,100 to 53,000 vehicles. Suppose Honda's profit margin with the rebate is $5,890 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.)
Chapter 3 Solutions
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
Ch. 3 - Prob. 1CCCh. 3 - If crude oil trades in a competitive market, would...Ch. 3 - How do investor's profit motives keep competitive...Ch. 3 - How do we determine whether a decision increases...Ch. 3 - How is an interest rate like a price?Ch. 3 - Is the value today of money to be received in one...Ch. 3 - Prob. 7CCCh. 3 - Prob. 8CCCh. 3 - What makes an investment decision a good one?Ch. 3 - How important are our personal preferences in...
Ch. 3 - Why are market prices useful to a financial...Ch. 3 - Why is arbitrage important to competitive market...Ch. 3 - Prob. 5CTCh. 3 - Can we directly compare dollar amounts received at...Ch. 3 - Prob. 7CTCh. 3 - What is a discount rate?Ch. 3 - What is compound interest?Ch. 3 - What is the intuition behind the geometric growth...Ch. 3 - Honda Motor Company is considering offering a...Ch. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Bubba is a shrimp farmer. In an ironic twist,...Ch. 3 - Brett has almond orchards, but he is sick of...Ch. 3 - You have $100 and a bank is offering 5% interest...Ch. 3 - Prob. 10PCh. 3 - A friend asks to borrow $55 from you and in return...Ch. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21PCh. 3 - Prob. 22PCh. 3 - 26. Your cousin is currently 12 years old. She...Ch. 3 - Prob. 24PCh. 3 - 29. You are planning to invest $5000 in an account...Ch. 3 - Prob. 26P
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