Should martin use the study

Assignment Help Finance Basics
Reference no: EM132385071

Mr. Martin has just been fired as the university bookstore manager for setting prices too low (only 20 percent above suggested retail). He is considering opening a competing bookstore near the campus, and he has begun an analysis of the situation. There are two possible sites under consideration. One is relatively small, while the other is large. If he opens at Site 1 and demand is good, he will generate a profit of $50,000. If demand is low, he will lose $10,000. If he opens at Site 2 and demand is high, he will generate a profit of $80,000, but he will lose $30,000 if demand is low. He also has the option of not opening at either site. He believes that there is a 50 percent chance that demand will be high. A market research study will cost $5,000. The probability of a good demand given a favorable study is 0.8. The probability of a good demand given an unfavorable study is 0.1. There is a 60 percent chance that the study will be favorable.

(a) Should Martin use the study? Why?

(b) If the study is done and the results are favorable, what would Martin's expected profit be?

Reference no: EM132385071

Questions Cloud

Confidence interval for the true mean age of population : What is the 95% confidence interval for the true mean age of this population?
What is the expected percentage-number of rejects : If the tolerance specified for the process is 50 +/-0.15mm, what is the expected percentage/number of rejects in a batch of 1 million?
Expected number of admissions for the fall semester : Compute the variance and the standard deviation of the number of admissions. (Round your standard deviation to 2 decimal places.)
Count the number of strings of length : We want to count the number of strings of length 5 from the English alphabet (A, B, ¨ ¨ ¨ , Z) subject to a number of different constraints.
Should martin use the study : (a) Should Martin use the study? Why? (b) If the study is done and the results are favorable, what would Martin's expected profit be?
What is the probability that all of the students : a. What is the probability that all of the students in the group are? male? b. What is the probability that two of the students in the group are ?male?
Dean of the western college of business : The dean of the western college of Business must plan the schools course offerings for the fall semester. Student demands make it necessary to offer
What is the sample proportion and how did you find it : A previous study indicated that 6.3% of college graduates majored in accounting. A study of 712 graduates found that 5.2% majored in accounting.
What is the probability that both are girls : Your friend has two children. What is the probability that both are girls? You know for a fact that at least one of them is a girl.

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculate the values for the following four formulas

Calculate the values for the following four formulas:Total Variable Cost = (Number of Workers x Worker's Daily Wage) + Other Variable Costs

  Calculate the annual depreciation allowances

A piece of newly purchased industrial equipment costs $984,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule

  What is the stocks expected price 5 years from now

Whited Inc.'s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75% per year. The required rate of return on the stock, rs, is 11.50%. What is the stock's expected price 5 years from now?

  You are considering buying either bond a or bond b both

you are considering buying either bond a or bond b. both bonds have a 10 year maturity and have a 6 yield to maturity.

  A treasury bond is quoted at a price of 10114 with a

a treasury bond is quoted at a price of 10114 with a current yield of 7.236 percent. what is the coupon rate?a. 7.20

  Calculate npv, irr, pi, dpb, pb

initial machine cost = $1,000,000, discount rate = 14%, tax rate = 33%, project life = 7 years (use MACRS), sales for the first year = $250,000 and are expected to increase 20% through year 5, but sales in year 6 & 7 will be stable at year 5's number..

  Integrating strategic planning-internal control conce

What are some methodologies and tools used in the analysis of potential risk factors in a teaching hospital, a primary care physician's office, and a public health facility?

  Computation of present value

Determine the present value of your trust fund if it promises to pay you $50,000 on your 40th birthday seven years from today  and earns 10 percent compounded annually

  What is the annualized discount rate percent

What is the annualized discount rate % and your annualized investment rate % on a Treasury bill that you purchase for $9,940 that will mature in 91 days for $10,000?

  Summary of company proposal

Prepare a final presentation of your company proposal. This will be a brief summary of your company proposal, which summarizes the writing assignments you have completed. Use the evaluation and comments on each assignment to refine your summary.

  Herbal resources is a small but profitable producer of

herbal resources is a small but profitable producer of dietary supplements for pets. this is not a high-tech business

  What change in price the bond will experience in dollars

A 6.75 percent coupon bond with fifteen years left to maturity is priced to offer a 8.5 percent yield to maturity.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd