Reference no: EM13339715

Financial Analysis: Planning & Budgeting - Pricing Decisions

Antitrust laws are in place to prevent pricing schemes that affect fair competition among sellers. They prevent sellers from unfairly using information to undercut competition so that they gain all the market share of the product pushing the competitor out of business and then raising the prices back to making profits. These laws also protect companies in the United States from being victimized by companies overseas trying to do the same thing on United States soil and the United States will take legal action to prevent such acts from happening. When a group of companies gets together to push one company out of a market through the use of pricing, this is known as collusive pricing and it do is an illegal act. (Pricing Decisions and Cost Management, 2006).

Discounted cash flow analysis is a numerical test that is used to determine if an investment will provide you a financial gain or if it is detrimental to the company. This analysis is susceptible to errors; however, each department within the company should try to make use of the information prior to making a decision concerning an investment. First, you need to estimate the increase of the growth on an annual basis. Next, a fair discount rate should be decided on. In most cases, companies will use the information provided by the US Treasury to come up with this rate. Then, using the number you get from subtracting the discount rate, you divide that answer by the growth rate that was estimated. (Menezes,n.d.).  It is a descent article and it make some sense. It tells us that is it a way to prove to the manager that there a possible way to use the DCF method in the departments. While there is no saving in the cost, the US Treasury rate can be used; however, there are not many ways that DCF can be used even though it is useful in make decision where investments are concerned.