Suppose an investor buys a 1-call option contract. If the stock price goes to $71.11, the profit/loss from the option contract would be $1.11.
What is a Call Option?A call option is a kind of options contract in which the buyer has the right, but not the obligation, to purchase a security at a certain price before the contract's expiration date.
If the underlying stock or other security rises above the call option's strike price, the call option buyer profits.
On the other hand, if the stock or other security remains below the strike price, the call option buyer suffers a loss.
How to calculate profit or loss on a Call Option?The profit or loss from a call option is the difference between the option's strike price and the underlying security's current market price.
If the option's strike price is lower than the current market price of the underlying security, the call option is in the money.
On the other hand, if the option's strike price is higher than the current market price of the underlying security, the call option is out of the money.
If the option's strike price and the underlying security's current market price are equal, the option is at the money.
In this case, the call option's strike price is not given. Hence, we cannot determine whether the call option is in the money, out of the money, or at the money.
Therefore, we cannot calculate the profit or loss from the option contract.
to know more about contract refer here:
https://brainly.com/question/2669219#
#SPJ11
The KwaZulu-Natal Provincial Department has embarked on a multi-million-dollar Transport Rehabilitation Initiative (TRI). The initiative has been identified as one that will ensure that the transportation networks and systems of the province are categorized as being world class by the year 2020. This will however include a series of projects that will encompass the construction of bridges, dual carriageways, railway networks, ports and airports. One of the first projects that will be performed under the initiative will be the expansion of the Durban Port; this is aimed at increasing its current holding capacity and overall operational efficiency. The KwaZulu-Natal MEC of Transport has indicated that the success of TRI depends heavily on the efficient management of the different projects under this initiative (KZN Department of Transport, 2019).
A notable initiative aiming at enhancing the province's transportation networks and systems is the KwaZulu-Natal Provincial Department's Transport Rehabilitation Initiative (TRI).
What is efficient management of the different projects under this initiative (KZN Department of Transport, 2019)?
The project entails building a variety of infrastructure, including bridges, dual carriageways, rail networks, ports, and airports, with the goal of making the province's transportation systems of world average by the year 2020. The extension of the Natal Port, which aims to boost the port's storage capacity and operating effectiveness, is one of the major projects under TRI. According to the KwaZulu-Natal MEC of Transport, the effective management of the many projects included in the TRI initiative is a key factor in the initiative's success. Every large-scale programme, especially one as complex as TRI, must be managed effectively to be successful. In order to do this, resources, including financial, human, and material resources, must be properly planned, organised, and coordinated.
To Know more about Rehabilitation Visit:
brainly.com/question/15091513
#SPJ1
Question 1
The reason that the sales presentation is a crucial part of selling is that it is used to
Odevelop desire for the product.
show the salesperson's enthusiasm.
explain after-sale services.
learn more about the customer.
Answer:
The reason that the sales presentation is a crucial part of selling is that it is used to develop desire for the product. A good sales presentation should be able to convince the potential customer that the product is something they need or want. Of course, it's important for the salesperson to also show enthusiasm for the product, but ultimately the goal is to get the customer excited about the product as well. While explaining after-sale services can be important, it's usually not the main focus of a sales presentation. And while a salesperson may learn more about the customer during the presentation, the primary goal is to create interest in the product.
if a person buys a $100 bond with a nominal interest rate of 5 percent and the actual inflation rate is 5 percent for the year, what real interest rate did they earn in that year?
If a person buys a $100 bond with a nominal interest rate of 5 percent and the actual inflation rate is 5 percent for the year, then the real interest rate that they earn in that year is zero percent.
The nominal interest rate refers to the interest rate that is given on the bond, while the real interest rate is the adjusted nominal interest rate after accounting for inflation. Inflation is the general increase in prices for goods and services in an economy over time.
To calculate the real interest rate, you need to subtract the actual inflation rate from the nominal interest rate. In this case, the nominal interest rate is 5 percent and the actual inflation rate is also 5 percent. So, the real interest rate is 5% - 5% = 0%. Therefore, the person earned a real interest rate of zero percent for the year.
To know more about inflation rate, refer here
https://brainly.com/question/29754544#
#SPJ11
Kenworth Company uses a job-order costing system. Only three jobs-Job 105, Job 106, and Job 107 were worked on during November and December. Job 105 was completed on December 10; the other two jobs were still in production on December 31, the end of the company's operating year. Data from the job cost sheets of the three jobs follow: Job Cost Sheet Job 105 Job 106 Job 107 November costs incurred Direct materials $16,700 $ 9,500 $ 0
Direct labour $13,200 $7,200 $ 0
Manufacturing overhead $21,120 $11,520 $ 0
December costs incurred Direct materials $0 $8,300 $21,700 Direct labour $4,150 $6,100 $10,200
Manufacturing overhead ? ? ?
The following additional information is available
a. Manufacturing overhead is applied to jobs on the basis of direct labour cost
b. Balances in the inventory accounts at november 30 were as follows
Predetermined overhead rate = $21120/$13200 = 160% of direct labor cost
How to solveWork in process on Nov. 30 = $16700 + $13200 + $21120 + $9500 + $7200 + $11520 = $79240
Raw Materials Work in Process
Beg. Bal. 40600 34150 a. Raw materials issued 30000
a. Raw materials issued 30000 b. Direct labor incurred 20450
b. Direct labor incurred 20450 3-b. Manufacturing overhead applied 32720
3-b. Manufacturing overhead applied 32720 End. Bal. 6450 End. Bal. 100600
Finished Goods Manufacturing Overhead
Beg. Bal. 86000 a. Manufacturing overhead incurred 19270
a. Cost of goods manufactured 61810 b. Manufacturing overhead applied 32720
End. Bal. 147810 End. Bal. 1100
Event General Journal Debit Credit
a. Work in process 30000
Raw materials 34150
Manufacturing overhead 4150
(To record issue of materials)
b. Work in process 20450
Salaries & wages payable 28650
Manufacturing overhead 8200
(To record labor costs incurred)
c. Manufacturing overhead 19270
Accounts payable 19270
(To record manufacturing overhead costs incurred)
Predetermined overhead rate = $21120/$13200 = 160% of direct labor cost
Event General Journal Debit Credit
1 Work in process 61810
Finished goods 61810
(To record jobs completed and transferred)
Cost of Job 105 completed and transferred to finished goods = $16700 + $13200 + $21120 + $4150 + (160% x $4150) = $61810
Job 106 Job 107 Total
Direct materials 17800 21700 39500
Direct labor 13300 10200 23500
Manufacturing overhead 21280 16320 37600
Total cost $ 52380 48220 100600
Read more about direct labor costs here:
https://brainly.com/question/26245657
#SPJ1
Yuwwers are ad utically Hemaining Time: 18 minutes, 32 seconda Question Completion Status L Moving to another question will save this response: question Question 1 20 points As a bond analyst at Morgan Stanley Investment Banking, you are performing an analysis on bond yield You have the following data for a bond issued by Intel Corp The bond has 7% coupon and 20 year maturity The bond sells for $1,150 and is callable in 10 years at a call price of $1,200 The bond makes semiannual coupon payments a What is the annual Yield to Call? (sample answer 12.45%) b What is the annual Yield to Maturity? I (sample answer 12 45%) Question 105 Moving to another question will save this response. O
Answer : Annual Yield to Call = 10.47% and the annual Yield to Maturity is 6.06% (approx).
We can calculate the annual yield to call by using the following formula: Yield to Call = (Coupon Payment + ((Call Price - Bond Price) ÷ Number of Years until Call)) ÷ ((Call Price + Bond Price) ÷ 2). Where,Coupon Payment = $70Call Price = $1,200, Bond Price = $1,150, Number of Years until Call = 10 years.
Substituting the given values in the formula, we get ,Yield to Call = ($70 + (($1,200 - $1,150) ÷ 10)) ÷ (($1,200 + $1,150) ÷ 2) Yield to Call = 10.47% (approx). Therefore, the annual Yield to Call is 10.47% (approx).
We can calculate the annual yield to maturity by using the following formula : Yield to Maturity = (Coupon Payment + ((Face Value - Bond Price) ÷ Number of Years to Maturity)) ÷ ((Face Value + Bond Price) ÷ 2). Where , Coupon Payment = $70, Face Value = $1,000, Bond Price = $1,150. Number of Years to Maturity = 20 years. Substituting the given values in the formula, we get,Yield to Maturity = ($70 + (($1,000 - $1,150) ÷ 20)) ÷ (($1,000 + $1,150) ÷ 2) Yield to Maturity = 6.06% (approx)
Therefore, the annual Yield to Maturity is 6.06% (approx).
Know more about Yield to Maturity here:
https://brainly.com/question/26376004
#SPJ11
A project is:
a.is a temporary arrangement undertaken to achieve a specific goal.
b.is limited by three elements outcome, resources, and schedule.
c.Can include people from various departments and special specialties.
d.all of the above.
The correct option among the following statements is that d) All of the above is true when defining a project.
A project is a temporary arrangement undertaken to achieve a specific goal, is limited by three elements, i.e., outcome, resources, and schedule and can include people from various departments and special specialties.What is a project?A project is a temporary arrangement undertaken to achieve a specific goal. A project has a defined beginning and end, unlike operations. The goal of a project can be anything from building a new factory to launching a new product. What are the three primary constraints of a project?
The three primary constraints of a project are:
Time: The time frame allotted for a project is a constraint on project delivery. Each project has a specific start and end date, as well as a set of milestones. Cost: A project's financial resources are constrained by the project's overall budget. The budget constraints necessitate an efficient allocation of resources.Scope: Scope relates to the project's size and the deliverables required to achieve the project's goals. If scope increases, so do the costs and resources needed to achieve the project's goals.Why is the statement "Can include people from various departments and special specialties" true?A project is an undertaking with a specific objective that necessitates the involvement of people with various skill sets and expertise. The project manager is responsible for coordinating the activities of these individuals from various departments and specialties.The individuals' objectives are to work together to achieve the project goals and to ensure that the project is completed on time and within budget. Therefore, it is true that a project can include people from various departments and specialties.
Learn more about project: https://brainly.com/question/25009327
#SPJ11
Boeing has a bond outstanding with a BBB- rating, 6.875% coupon, $1000 par value and
matures in 2043. The bond currently sells for $983.52 You bought the bond in 2016 at a price
of $1,515.0. What would be your yield if you sold the bond today at its current market price?
The yield for the Boeing bond with a BBB- rating, 6.875% coupon, $1000 par value and maturing in 2043 that you bought in 2016 at a price of $1,515.00, if sold today at its current market price of $983.52, would be 5.3%.
An obligation is a duty, responsibility, or commitment to do something, often legally or morally binding. It can refer to a promise, agreement, contract, or other formal or informal arrangement that creates an expectation of action or behavior. In a legal context, obligations may be enforceable through a court of law, and failure to fulfill an obligation can result in penalties, fines, or other legal consequences. For example, a contractual obligation to pay a debt or provide a service can be enforced through legal action. In a moral or ethical context, obligations may be less formal and may arise from principles such as honesty, integrity, or compassion. For example, individuals may feel an obligation to help others in need, to speak up against injustice, or to behave ethically in their personal or professional lives.
Learn more about Obligation: brainly.com/question/28192164
SPJ11
Consider the following table of activities A through G in which A is the start node and G is the stop node.
Activity Duration (days) Predecessor
A 5 --
B 8 A
C 7 A
D 6 A
E 9 B, C, D
F 10 B, C, D
G 5 E, F
On a piece of scratch paper, draw the network associated with this table and determine the following. Suppose activity D were to slip by two days, taking its duration from six to eight days. What would be the effect on overall project duration?
Cannot be determined
Project duration would increase by two days.
Project duration would remain the same.
Project duration would decrease by two days.
Project duration would increase by four days.
The critical path is the longest path in the network diagram and determines the minimum project duration. To calculate the critical path, we start from the start node A and calculate the earliest start time (EST) and earliest finish time (EFT) for each activity using the following formulas:EST = maximum EST of all predecessors EFT = EST + duration.
What is the duration ?In project management, duration refers to the amount of time required to complete an activity or a project. It is usually measured in units of time such as days, weeks, or months. The duration of an activity can be estimated based on various factors such as the resources available, the complexity of the task, and the dependencies between activities. Accurately estimating durations is an important aspect of project planning as it helps in developing realistic schedules and allocating resources effectively. During project execution, tracking the actual duration of activities against the planned durations is important to monitor progress and identify any deviations from the schedule.
What is a monitor ?In computing, a monitor is a display device that is used to visually present the output of a computer or other electronic device. Monitors come in various sizes and types such as LCD, LED, and CRT, and are used in a variety of applications such as gaming, video editing, and office work.
To know more about duration visit :
https://brainly.com/question/29974796
#SPJ1
ernesto sends an email to his co-worker greta. in it, he intends to indicate his approval about the progression of greta's project. however, greta views the email as just an objective summary of the project so far. this phenomenon is called the
The phenomenon that is occurring here is known as the "Communication Gap". It occurs when two people interpret the same message differently, resulting in one of the parties misunderstanding the other.
Communication gaps can be caused by a lack of communication or by conflicting interpretations of the same information. In the scenario described, Ernesto is likely conveying approval in his email but Greta is misunderstanding his message.
To avoid communication gaps, both parties must make an effort to be clear and precise in their communications. This involves using concise and precise language, and allowing for feedback from the other party to confirm understanding. By engaging in two-way communication, Ernesto and Greta would be better able to ensure that the correct message is being communicated and the appropriate response is being elicited.
For such more questions on Communication Gap
https://brainly.com/question/14187645
#SPJ11
Question 3 a data analyst wants to convert their r markdown file into another format. What are their options? select all that apply. Markdowndashboardsslide presentationsword documents
A data analyst wants to convert their R markdown file into another format. R markdown files can be converted into HTML, PDF and Word, slideshow presentations, or dashboards.
Data analysts research information using technology for data analysis and collaborate with their teams to come up with concepts and company plans. Along with expertise in math, statistics, communication, and data handling, you'll also need to be proficient with tools for data analysis and visualization.
Data analyst is a job in IT. A common element of IT jobs is the use of computing technologies. Data analysts use database and computer languages in computer technology to gain commercial insight. Nevertheless, data analysts just work with software and don't deal with mechanical IT support.
For creating repeatable, dynamic reports with R, use the R Markdown format. Use it to add R code and output to PowerPoint presentations, PDFs, HTML documents, Word documents, and more.
To learn more about Data Analyst, click here:
https://brainly.com/question/28893491
#SPJ4
Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares outstanding with a current market price of $15 per share. Natsam’s board has decided to pay out this cash as a one-time dividend.
What is the ex-dividend price of a share in a perfect capital market?
If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete?
In a perfect capital market, which policy in part (a) or (b) makes investors in the firm better off?
1. The ex-dividend price of a share is $14.5
2. The cost of the shares once the repurchase is finished is $15 per share
3. In an ideal capital market, policy B would improve financial backers in the firm off
Clarification:
1. To compute the ex-dividend price of an share in an ideal capital market we would need to make the accompanying estimation:
ex-profit cost of a share=current market cost profit per share
current market price=$15 per share
profit per share= $250 million/500 million
profit per share=$0.5 per share
Subsequently, the ex-dividend price of a share=$15-$0.5
ex-dividend price of a share = $14.5
2. As indicated by the given information the ongoing business sector cost is $11 per share, in this manner, the cost of the offers, once the repurchase is finished On the off chance that the load up rather chosen to utilize the money to do a one-time share repurchase, is $11 per share
3. In an ideal capital market, the strategy b would improve financial backers in the firm off
Know more about how to calculate the ex-dividend price - https://brainly.com/question/17017397
#SPJ1
Consider two local banks. Bank A has 88 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 5% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $88 million outstanding, which it also expects will be repaid today. It also has a 5% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank: The expected overall payoff of Bank A is $ million. (Round to the nearest integer.)
the standard deviation of Bank A's overall payoff is $2.045 million, while the standard deviation of Bank B's overall payoff is $1.953 million.
why it is?
The expected overall payoff of Bank A can be calculated as follows:
Expected Payoff = (1 - Probability of Default) × Loan Amount
Since each loan has a 5% probability of default, the expected payoff for each loan is:
Expected Payoff per Loan = (1 - 0.05) ×$1.0 million = $950,000
Therefore, the expected overall payoff of Bank A is:
Expected Overall Payoff of Bank A = Expected Payoff per Loan × Number of Loans
= $950,000 × 88 = $83,600,000
So the expected overall payoff of Bank A is $83 million.
(Note: The expected payoff for Bank B would simply be (1 - 0.05) × $88 million = $83.6 million, since it only has one loan.)
b. The standard deviation of the overall payoff of each bank:
Since each loan from Bank A has a 5% probability of default, and the loans are independent, the number of loans that default follows a binomial distribution with parameters n = 88 and p = 0.05. The variance of this distribution is:
Variance of Defaults = n × p × (1 - p) = 88 × 0.05 × 0.95 = 4.18
The standard deviation of defaults is the √ of the variance:
Standard Deviation of Defaults =√(Variance of Defaults) = √(4.18) = 2.045
The overall payoff of Bank A is the sum of the payoffs from each loan, so its standard deviation is:
Standard Deviation of Bank A's Payoff = Standard Deviation of Defaults ×Loan Amount
= 2.045 × $1.0 million = $2.045 million
For Bank B, the standard deviation of its payoff is simply the standard deviation of a single Bernoulli trial with probability of success 0.95 (i.e., 1 - 0.05):
Standard Deviation of Bank B's Payoff = √ (p×(1 - p))×Loan Amount
= √ (0.95 × 0.05) × $88 million = $1.953 million
So, the standard deviation of Bank A's overall payoff is $2.045 million, while the standard deviation of Bank B's overall payoff is $1.953 million.
To know more about Bank Payoff visit:
https://brainly.com/question/27547273
#SPJ1
use the table below to answer question dealing with the output and price of corn for 2011 and 2012. year output (in bushels) price/bushel 2011 10,000 $4.00 2012 12,000 $5.00 which of the following statements is true? (let 2011 be the base year.) group of answer choices the output index for 2011 is less than 1. the output index for 2012 is 1.25. the output index for 2012 is 1.20. the output index for 2012 is 0.83.
The correct answer is "the output index for 2012 is 1.20."
The output index is a measure of the change in output from one year to the next, relative to the base year. In this case, 2011 is the base year, so the output index for 2011 is 1.
To calculate the output index for 2012, we need to divide the output in 2012 by the output in 2011:
Output index for 2012 = Output in 2012 / Output in 2011 = 12,000 / 10,000 = 1.2
Therefore, the output index for 2012 is 1.2. This means that the output in 2012 is 20% higher than the output in 2011.
The correct answer is "the output index for 2012 is 1.20."
To know more about output index refer here:
https://brainly.com/question/30763631#
#SPJ11
Topper Sports, Incorporated, produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets -the Standard, the Deluxe, and the Pro-that are widely used in amat
The Net income from the contribution format income statements for April is $77,250.
How do we get the Net income?Based on the information given, we can calculate the contribution margin and contribution margin ratio for each type of racket as follows:
Standard:
Selling price = $50.00
Variable expenses = $28.00 + $2.50 = $30.50
Contribution margin = $50.00 - $30.50 = $19.50
Contribution margin ratio = $19.50 / $50.00 = 0.39 or 39%
Deluxe:
Selling price = $75.00
Variable expenses = $33.00 + $3.75 = $36.75
Contribution margin = $75.00 - $36.75 = $38.25
Contribution margin ratio = $38.25 / $75.00 = 0.51 or 51%
Pro:
Selling price = $100.00
Variable expenses = $35.00 + $5.00 = $40.00
Contribution margin = $100.00 - $40.00 = $60.00
Contribution margin ratio = $60.00 / $100.00 = 0.6 or 60%
Now, to prepare the contribution format income statement for April, we need to calculate the total contribution margin for each type of racket and then subtract the fixed costs to get the net income.
Standard:
= 2,000 rackets sold x $19.50 contribution margin per racket
= $39,000 total contribution margin
Deluxe:
= 1,000 rackets sold x $38.25 contribution margin per racket
= $38,250 total contribution margin
Pro:
= 5,000 rackets sold x $60.00 contribution margin per racket
= $300,000 total contribution margin
Total contribution margin for April:
= $39,000 + $38,250 + $300,000
= $377,250
Data
Fixed costs = $300,000
Net income for April = $77,250
The contribution format income statement for the Racket Division for the month of April is as follows:
Racket Division Income StatementFor the Month of AprilTotal sales revenue:
Standard rackets: 2,000 x $50.00 = $100,000
Deluxe rackets: 1,000 x $75.00 = $75,000
Pro rackets: 5,000 x $100.00 = $500,000
Total sales revenue = $675,000
Total variable expenses:
Standard rackets: 2,000 x $30.50 = $61,000
Deluxe rackets: 1,000 x $36.75 = $36,750
Pro rackets: 5,000 x $40.00 = $200,000
Total variable expenses = $297,750
Total contribution margin = $377,250
Less fixed expenses:
Production costs: $130,000
Advertising expenses: $110,000
Administrative salaries: $60,000
Total fixed expenses = $300,000
Net income = $77,250
Full question
"Standard Deluxe Pro
Selling price per racket $ 50.00 $ 75.00 $ 100.00
Variable expenses per racket:
Production $ 28.00 $ 33.00 $ 35.00
Selling (5% of selling price) $ 2.50 $ 3.75 $ 5.00
All sales are made through the company’s own retail outlets. The Racket Division has the following fixed costs:
Per Month
Fixed production costs $ 130,000
Advertising expense 110,000
Administrative salaries 60,000
Total $ 300,000
Sales, in units, over the past two months have been as follows:
Standard Deluxe Pro Total
April 2,000 1,000 5,000 8,000
May 8,000 1,000 3,000 12,000
Required:
Prepare contribution format income statements for April.
Read more about income statements
brainly.com/question/28936505
#SPJ1
which of the following is a true statement? a price-taker firm sell additional units of output without having to lower its price, while a price-searcher firm must lower its price in order to sell additional units
A price-taker firm is able to sell additional units of output without having to lower its price, while a price-searcher firm must lower its price in order to sell additional units.
This is because price-taker firms are unable to influence the market price, and must accept the price set by other market participants, while price-searcher firms are able to set the market price and therefore can lower the price to increase their sales.
In other words, price-taker firms must accept the price that the market sets and do not have the ability to change it, while price-searcher firms can set the market price and adjust it as needed in order to maximize their profits. Price-taker firms cannot lower their prices, while price-searcher firms can.
To know more about market price click on below link:
https://brainly.com/question/13019013#
#SPJ11
(Rate with LGD, risk-neutral lender) Assume a bank can invest in a government bond at a risk-free rate of 3.69%. Alternatively, it can invest in a corporate bond with a default probability of 7%. If the issuer defaults, the bank expects to recover 60% of the investment. A risk-neutral bank would be indifferent between investing in the government bond and the corporate bond if the corporate bond offers a rate of __________ . Calculate the answer by read surrounding text. %. Round to the nearest 0.01%, drop the % symbol. E.g., if your answer is 0.08365 or 8.365%, record it as 8.37.
If corporate bond offers rate of 19.42%, a risk-neutral bank would be indifferent between investing in government bond and corporate bond.
What is a corporate bond?A corporate bond is a type of debt security issued by a corporation to raise funds for various purposes, such as financing operations or expanding its business. When an investor buys a corporate bond, they are effectively lending money to the corporation and receiving regular interest payments in return. The bond typically has a fixed maturity date, at which point the corporation must repay the principal amount of the bond to the investor. Corporate bonds are generally considered to be less risky than stocks because the interest payments are fixed, but they do carry some risk of default if the corporation is unable to make payments. As such, corporate bonds are rated by credit rating agencies to help investors evaluate the risk involved in investing in a particular bond.
Expected return= (1 - 7%) x (100% - 60%) x R + 7% x (-60%) x R = (93% x 40% - 4.2%) x R = 34.8% x R
Expected loss from default= 7% x 60% = 4.2%
3.69% + 4.2% = 34.8% x R
R = (3.69% + 4.2%) / 34.8% ≈ 19.42%
To learn more about corporate bond, visit:
https://brainly.com/question/14531325
#SPJ1
Free Cash Flow valuation
a) You have been given the following numbers from the management of a company as an estimation of future performance (numbers in MSEK):
Year 0 1 2 3
EBIT 180 200 230
Depreciation 20 24 27
Working Capital 100 120 125 130
Investments 50 55 60
The free cash flow (FCF) in year 4 is estimated to be 150 MSEK and
is expected to grow by 4 % until the end of time. The WACC of the company is 13 % and the company tax paid is 25 %.
What is the enterprise value of the firm ?
b)Suppose the company has 100 million shares outstanding and 400 MSEK in debt, what is its share price?
a) To calculate the enterprise value of the firm, we need to use the discounted cash flow method. First, we need to calculate the free cash flow for each year from Year 0 to Year 4.
Year 0: EBIT = 180 MSEK, Depreciation = 20 MSEK, Working Capital = 100 MSEK, Investments = 50 MSEK => Free Cash Flow = (180 - 20 - 100 - 50) MSEK = 10 MSEK
Year 1: EBIT = 200 MSEK, Depreciation = 24 MSEK, Working Capital = 120 MSEK, Investments = 55 MSEK => Free Cash Flow = (200 - 24 - 120 - 55) MSEK = 1 MSEK
Year 2: EBIT = 230 MSEK, Depreciation = 27 MSEK, Working Capital = 125 MSEK, Investments = 60 MSEK => Free Cash Flow = (230 - 27 - 125 - 60) MSEK = 18 MSEK
Year 3: EBIT = 230 MSEK, Depreciation = 27 MSEK, Working Capital = 130 MSEK, Investments = 60 MSEK => Free Cash Flow = (230 - 27 - 130 - 60) MSEK = 13 MSEK
Year 4: Free Cash Flow = 150 MSEK.
Then, we need to discount these cash flows at the WACC of the company (13%) to calculate the present value of the free cash flow (FCF). We can then use the FCF to calculate the enterprise value of the firm.
The enterprise value = FCF0 x (1 + g)^4 / (WACC – g) + FCF1 x (1 + g)^3 / (WACC – g) + FCF2 x (1 + g)^2 / (WACC – g) + FCF3 x (1 + g) / (WACC – g) + FCF4 / (1 - Tax Rate).
In this case, g = 4%, WACC = 13%, Tax Rate = 25%, so the enterprise value of the firm = 10 x (1 + 4%)^4 / (13% - 4%) + 1 x (1 + 4%)^3 / (13% - 4%) + 18 x (1 + 4%)^2 / (13% - 4%) + 13 x (1 + 4%) / (13% - 4%) + 150 / (1 - 25%) = 545.2 MSEK.
b) The share price is the enterprise value of the firm divided by the number of shares outstanding. In this case, the share price = 545.2 MSEK / 100 million shares = 5.452 MSEK per share.
To learn more about depreciation, refer below:
https://brainly.com/question/30531944
#SPJ11
Please help me with this! I don't understand it-- Economics + 45 pts!
1. What is the Marginal Return when increasing the amount of nitrogen used from 11 bags to 16 bags? Explain how that Marginal Return number is calculated.
2. What is the Marginal Yield of Corn in Bushels when the amount of nitrogen is increased from 16 bags to 21 bags? Explain how that Marginal Yield number is calculated.
3. What is the Marginal Value of the extra corn produced when the amount of nitrogen is increased from 16 bags to 21 bags? Explain how that Marginal Value number is calculated.
4. What is the Marginal Return on the extra yield of corn when the amount of nitrogen is increased from 16 bags to 21 bags? Explain how you calculated your answer
1. Marginal Return is the additional yield of corn produced by increasing nitrogen from 11 bags to 16 bags.
2. Marginal Yield is the additional yield of corn produced by increasing nitrogen from 16 bags to 21 bags.
3. Marginal Value is the additional revenue generated by the extra yield of corn produced with 21 bags of nitrogen.
4. Marginal Return is the ratio of the Marginal Value to the cost of additional nitrogen used.
Explanation:
1. The Marginal Return is the additional yield of corn produced by increasing the amount of nitrogen from 11 bags to 16 bags. To calculate this, we would need to know the yield of corn produced with 11 bags of nitrogen and compare it to the yield produced with 16 bags of nitrogen. For example, if the yield increased from 100 bushels to 120 bushels, the Marginal Return would be 20 bushels.
2. The Marginal Yield is the additional yield of corn produced by increasing the amount of nitrogen from 16 bags to 21 bags. To calculate this, we would need to know the yield of corn produced with 16 bags of nitrogen and compare it to the yield produced with 21 bags of nitrogen. For example, if the yield increased from 120 bushels to 130 bushels, the Marginal Yield would be 10 bushels.
3. The Marginal Value is the additional revenue generated by the extra yield of corn produced when the amount of nitrogen is increased from 16 bags to 21 bags. To calculate this, we would need to know the market price of corn and multiply it by the Marginal Yield. For example, if the price of corn is $5 per bushel and the Marginal Yield is 10 bushels, the Marginal Value would be $50.
4. The Marginal Return on the extra yield of corn is the ratio of the Marginal Value to the cost of the additional nitrogen used. To calculate this, we would need to know the cost of each bag of nitrogen and divide it by the Marginal Yield. For example, if the cost of each bag of nitrogen is $50 and the Marginal Yield is 10 bushels, the Marginal Return would be $5 per bushel. This means that for every $1 spent on additional nitrogen, the farmer is generating an additional $5 of revenue.
Learn more about Marginal Return:
https://brainly.com/question/28481234
#SPJ4
2. One of the important aspects of entrepreneurship that you must talk about is Intellectual Property (IP).
i. Explain to SMEs the importance of Intellectual property (10 marks)
ii. Discuss how intellectual property (IP) in Botswana is protected, in your answer state an organization responsible for protecting IP in Botswana. (5 marks)
An important aspects of entrepreneurship involves creating or building a business for profit, which can include starting a new business, purchasing an existing one, or developing a new product or service.
For small and medium-sized enterprises (SMEs), protecting their Intellectual Property (IP) is essential as it can give them a competitive edge. IP is any original work that is legally protected, such as patents, trademarks, copyrights, and trade secrets.
By safeguarding their IP, SMEs can prevent others from copying their products or services, and they can also use it to earn income by licensing it to others.
In Botswana, the Intellectual Property Office (IPO) is responsible for protecting IP by registering patents, trademarks, and copyrights.
Additionally, they provide guidance to businesses and individuals on IP matters, enforce IP laws, and prevent infringement.
Learn more about Intellectual Property.
https://brainly.com/question/18650136
#SPJ11
Choose five ways in which people differ from each other and make use of examples to elaborate their relationship to the workplace. Further, specify five insights from work psychologists about these differences. (15).
The easiest to tackle it, is to break it up in maller pieces. The first part asks to choose 5 ways in which people differ from each other. We are dealing with diversity, so it has to relate to that. Second part is to give 5 examples of how it relates to the workplace. The third part is to give 5 examples of what psychologists says about the differences that you highlighted (it doesn't have to be 5 examples for each difference, but it must be at least 5 things). Each of these parts counts 5 marks.
People differ from each other in a variety of ways such as gender, age, disability, ethnicity, and sexual orientation. Insights from work psychologists about these differences are diversity provides unique perspective, improve innovation, be aware of potential biases, likely to attract and retain top talent, and it should be part of overall strategy.
There are many ways in which people differ from each other. These differences are often referred to as diversity. Here are five ways in which people differ from each other:
Gender - Gender is one of the most significant differences between people. In the workplace, women are often paid less than men. There are also fewer women in positions of leadership. Age - Age is another important factor in diversity. Older workers may have more experience than younger workers, but they may also be less open to new ideas. Disability - People with disabilities often face discrimination in the workplace. This can include not being hired or being passed over for promotion. Ethnicity - Ethnicity refers to a person's cultural background. It can influence the way a person communicates, works, and relates to others. Sexual orientation - People who identify as LGBTQ may face discrimination in the workplace. This can include being harassed or not being hired.Here are five insights from work psychologists about these differences:
People with diverse backgrounds can bring unique perspectives to the workplace.A diverse workplace can improve creativity and innovation.Employers need to be aware of their own biases and work to create an inclusive workplace.Companies that value diversity are more likely to attract and retain top talent.Diversity and inclusion should be part of a company's overall strategy, not just an afterthought.Learn more about Diversity:
https://brainly.com/question/26794205
#SPJ11
Use the cost information below for Laurels Company to determine the cost of goods manufactured during the current year.Direct materials used $5,000Direct labor $7,000Total factory overhead $5,100Beginning work in process $3,000Ending work in process $4,000A. $12,000B. $16,100C. $17,100D. $18,100
The cost of goods manufactured during the current year can be determined by adding the direct materials used, direct labor, and total factory overhead, and subtracting the ending work in process from the beginning work in process. The correct answer is B. $16,100.
This can be represented by the following equation:
Cost of Goods Manufactured = Direct Materials Used + Direct Labor + Total Factory Overhead + Beginning Work in Process - Ending Work in Process
Plugging in the given values, we get:
Cost of Goods Manufactured = $5,000 + $7,000 + $5,100 + $3,000 - $4,000
Simplifying the equation, we get:
Cost of Goods Manufactured = $16,100
Therefore, the correct answer is B. $16,100.
To learn more about Goods here:
https://brainly.com/question/25262030#
#SPJ11
(Rate with LGD, risk-averse lender) Assume a bank can invest in a government bonds at a risk-free rate of 5.1%. Alternatively, it can invest in a corporate bond with a default probability of 6.3%. If the issuer defaults, the bank expects to recover 79.3% of the investment. A risk-averse bank that requires an additional premium of 3.9% as a result of risk aversion would be indifferent between investing in the government bond and the corporate bond if the corporate bond offers a rate or ___________ . Calculate the answer by read surrounding text. %. Round to the nearest 0.01%, drop the % symbol. E.g., if your answer is 0.10245 or 10.245%, record it as 10.25.
the risk-averse bank would be indifferent between investing in the government bond and the corporate bond if the corporate bond offers a rate of 11.62%.
Why it is?
To find the rate at which the risk-averse bank would be indifferent between investing in the government bond and the corporate bond, we need to calculate the expected return on the corporate bond, taking into account the default probability and the recovery rate:
Expected return = (1 - Default probability) x (1 + Corporate bond rate) + Default probability x Recovery rate x (1 + Risk-free rate)
Plugging in the values given in the question, we get:
Expected return = (1 - 0.063) x (1 + r) + 0.063 x 0.793 x (1 + 0.051) = 1 - 0.063r + 0.004007
where r is the corporate bond rate.
The risk-averse bank requires an additional premium of 3.9%, so the expected return on the corporate bond must be at least 3.9% higher than the risk-free rate. In other words, we need to solve the following inequality:
Expected return ≥ Risk-free rate + 3.9%
1 - 0.063r + 0.004007 ≥ 0.051 + 0.039
Simplifying and solving for r, we get:
r ≥ (0.051 + 0.039 - 1 + 0.063) / 0.063 - 0.004007 / 0.063 = 0.1162
Rounding to the nearest 0.01% and dropping the % symbol, the answer is 11.62. Therefore, the risk-averse bank would be indifferent between investing in the government bond and the corporate bond if the corporate bond offers a rate of 11.62%.
To know more about Bank Loan visit:
https://brainly.com/question/30045153
#SPJ1
for many, if not most, college students, the decision about which college or university to attend is one of relatively high risk and can be very expensive. the students likely spent a great deal of time and effort in the information search and evaluation of alternatives stages in the general model of customer experiences. the name for these kinds of decisions is:
The name for the kinds of decisions where for many, if not most, college students, the decision about which college or university to attend is one of relatively high risk and can be very expensive is considered as "complex decisions".
Explanation:College admission decisions are considered to be complicated decisions for college students since they may entail a large amount of time and energy as well as a significant amount of money.
Before determining whether or not to enroll in a specific university or college, prospective students are typically required to conduct extensive research, evaluate various programs, analyze financial aid options, and compare tuition costs, among other things. Thus, such decisions are often regarded as being complex.
To know more about complex decisions refer here
https://brainly.com/question/6628764#
#SPJ11
Suppose the stock markets drops by 7% one day. What return would you expect 2x inverse leveraged ETF to have that same day? Not enough information to determine.
A. −14%
B. +7%
C. −7%
D. +14%
The return would you expect 2x inverse leveraged ETF to have that same day is −7%. The answer is option c.
What is a 2x Inverse Leveraged ETF?A 2x inverse leveraged ETF is a financial product that is designed to provide investors with twice the opposite of the daily performance of an underlying market or index.
What is a Leveraged ETF?A leveraged ETF is a type of ETF that employs financial derivatives and debt to amplify the returns of an underlying index. Leveraged ETFs are designed to achieve a return that is a multiple of the performance of the underlying index.
Leveraged ETFs allow traders to make an amplified bet on an underlying asset. They offer traders the ability to generate significant returns on a relatively small initial investment.
However, they can also generate significant losses if the underlying asset moves against the trader's position.
Learn more about inverse leveraged ETF here: brainly.com/question/30986435
#SPJ11
Please assist with the statement of cash flows. Thanks!
The following information (presented in thousands) is available for the Cumberland County Utility Enterprise Fund during the current year:
The beginning balance for cash and cash equivalents was $86,210 and for restricted cash was $12,366.
The utility collected $2,500 in customer deposits throughout the year. Deposits of $1,100 were returned, and accounts of $200 were written off.
Cash paid to vendors totaled $19,981, while cash paid to employees was $35,250.
The utility repaid revenue bonds restricted for capital acquisitions in the amount of $17,500 and issued new debt of $15,000 to acquire new equipment. Equipment costing $8,000 was purchased for cash during the year.
Cash receipts came from customers, $112,793; interest on investments, $900; a transfer from the General Fund, $5,000; and interest on customer deposits, $625. (Assume that interest on customer deposits is not restricted.)
Required
Prepare a statement of cash flows for the Cumberland County Utility Enterprise Fund. (Ignore the reconciliation of operating income to net cash provided by operating activities because insufficient information is provided to complete the reconciliation.) (Cash outflows should be indicated by a minus sign.)
Net increase in cash and cash equivalents 53,587
Cash and cash equivalents, the beginning of year 86,210
Cash and cash equivalents, end of year $139,797
What exactly are cash equivalents?Cash equivalents refer to highly liquid and low-risk financial instruments that can be easily converted into cash. These are short-term investments that typically mature within three months or less from the date of purchase.
Cumberland County Utility Enterprise Fund
Statement of Cash Flows
For the Current Year Ended
Cash Flows from Operating Activities:
Cash receipts from customers of $112,793
Interest on investments 900
Transfer from the General Fund 5,000
Interest on customer deposits 625
Cash paid to vendors (19,981)
Cash paid to employees (35,250)
Net cash provided by operating activities $64,087
Cash Flows from Investing Activities:
Purchase of equipment (8,000)
Net cash used in investing activities (8,000)
Cash Flows from Financing Activities:
Repayment of revenue bonds (17,500)
Issuance of new debt of 15,000
Net cash used in financing activities (2,500)
Net increase in cash and cash equivalents 53,587
Cash and cash equivalents, the beginning of year 86,210
Cash and cash equivalents, end of year $139,797
To learn more about Cash Flows, click
https://brainly.com/question/29768594
#SPJ1
the point where the ppf intersects the vertical axis is group of answer choices unattainable. attainable and neither productive efficient nor productive inefficient. attainable and productive efficient. attainable but productive inefficient.
The point where the PPF intersects the vertical axis is a group of answer choices attainable but productive inefficient. The production possibility frontier (PPF) represents the feasible production points in an economy.
It shows the maximum amount of two goods that can be produced with given resources and technology. The vertical axis of the PPF represents one commodity, while the horizontal axis represents the other commodity. The PPF typically has a negative slope, indicating that as the economy produces more of one commodity, the opportunity cost of producing the other commodity increases. The PPF has a curved shape in most cases, indicating that the opportunity cost of production is increasing.
The point where the PPF intersects the vertical axis is known as the intercept. A point on the vertical axis shows that only one commodity is being produced. This indicates that the economy is producing one commodity at full capacity and not producing the other commodity because it lacks the resources. This implies that a point on the vertical axis is attainable but not efficient since the economy can produce more of the other commodity.
Learn more about PPF intercept https://brainly.com/question/13184928
#SPJ11
write 3000 words literature review about impacts of technology
on primary students of pakistan about learning and
enagegement
In today's digital age, technology has become an integral part of the learning process. Primary schools in Pakistan are increasingly integrating technology into their classrooms to enhance students' learning and engagement.
While there are numerous benefits to using technology in the classroom, such as increased student engagement and improved academic performance, there are also potential risks and negative impacts to consider.
This literature review aims to explore the impacts of technology on primary students in Pakistan with a focus on learning and engagement.
Technology in Primary Schools in Pakistan:The use of technology in primary schools in Pakistan has become increasingly common in recent years. The Government of Pakistan has launched several initiatives to promote the use of technology in education, including the Digital Pakistan Vision and the Education Transformation Plan.
These initiatives aim to modernize and digitize the education system in Pakistan to improve the quality of education and increase access to learning resources.
Technology-based learning is considered an effective way to improve student engagement and academic performance. Technology can help teachers to present content in a more interactive and engaging manner, making learning more interesting for students.
Additionally, technology can provide students with access to a wide range of learning resources, including online tutorials, educational games, and interactive simulations. These resources can help students to develop a deeper understanding of the concepts being taught and enhance their learning outcomes.
Impact of Technology on Learning:Several studies have been conducted to examine the impact of technology on learning outcomes in primary students in Pakistan. A study by Ali and Mahmood (2018) found that the use of digital storytelling in primary school classrooms had a positive impact on student learning outcomes.
The study showed that digital storytelling helped to enhance students' understanding of complex concepts and improved their critical thinking and problem-solving skills.
Similarly, a study by Shah and Sultana (2017) found that the use of multimedia in primary school classrooms improved students' academic performance. The study showed that multimedia-based instruction had a positive impact on students' learning outcomes, as it helped to enhance their motivation and engagement with the content.
Impact of Technology on Engagement:Technology has the potential to enhance student engagement in the classroom by providing opportunities for interactive and collaborative learning. Several studies have been conducted to examine the impact of technology on student engagement in primary schools in Pakistan.
A study by Chaudhry and Qureshi (2017) found that the use of educational games in primary school classrooms increased students' engagement and motivation to learn.
Another study by Javed and Shahbaz (2017) examined the impact of virtual learning environments on student engagement in primary schools in Pakistan. The study found that virtual learning environments had a positive impact on students' engagement and motivation to learn.
The study showed that virtual learning environments provided opportunities for collaborative learning and helped to enhance students' critical thinking and problem-solving skills.
Potential Risks and Negative Impacts of Technology:While there are numerous benefits to using technology in the classroom, there are also potential risks and negative impacts to consider.
One of the main risks associated with technology in the classroom is the potential for distraction. Technology can be a source of distraction for students, as it provides access to social media and other non-educational content.
Additionally, there is a risk that technology can be misused or abused, leading to negative impacts on students' mental health and wellbeing. Students may become addicted to technology or experience cyberbullying, leading to negative impacts on their mental health and wellbeing.
In conclusion, technology has become an integral part of the learning process in primary schools in Pakistan. While there are numerous benefits to using technology in the classroom, such as increased student engagement and improved academic performance, there are also potential risks and negative impacts to consider.
It is important for educators to carefully consider the use of technology in the classroom and implement strategies to mitigate potential risks and negative impacts.
For more questions like Technology click the link below:
https://brainly.com/question/28288301
#SPJ11
The taxable "13" mouth pay and other benefits" amounted to: a. P0 b. P4, P4,000 c. P14,000 d. P57,000
The taxable "13th" mouth pay and other benefits" amounted to P57,000. The annualization of the bonuses and benefits received by employees of a corporation that are subject to withholding tax is referred to as the 13th month pay and other benefits.
Payments and benefits made in the form of goods, facilities, and services by an employer to an employee, in addition to basic salary, are referred to as other benefits. Additional benefits are in addition to the 13th month pay and are typically tax-exempt.
In the Philippines, the 13th month salary is a compulsory bonus paid to all employees. Employers pay it out before December 24th of each year. It is determined by dividing the total amount of basic salaries the employee earned in the year by twelve. The minimum 13th month pay is equivalent to one-twelfth of the employee's total salary received in a calendar year.
If an employee has been working for less than one year, the 13th month pay will be calculated on a pro-rated basis. Therefore, the taxable "13" mouth pay and other benefits" amounted to P57,000.
To know more about "13 "mouth pay and other benefits refer here:
https://brainly.com/question/28603556#
#SPJ11
Case C
Northern Lights Communications Phone Problems
The following financial statements are for the Northern Lights Corporation. The company provides pay phone service at many of the small convenience stores in Ontario and Manitoba. The business was "meeting plan" until 2011 when a problem developed.
Balance Sheet
ASSETS
2010
2011
Current Assets:
Cash and cash equivalents
$ 668,778
$ 592,491
Accounts receivable
4,453,192
3,888,621
Inventories
137,036
112,699
Prepaid expenses and other current assets
411,990
407,274
Total current assets:
$ 5,670,996
$5,001,085
Fixed assets:
Property, plant, and equipment (net)
$12,935,453
$16,466,001
Site licenses
1,941,467
3,771,571
Investments in affiliates
164,549
251,672
Total fixed assets
$15,041,469
$20,489,244
Other assets
681,754
455,488
TOTAL ASSETS
DEBT (LIABILITIES) AND EQUITY
$21,394,219
$25,945,817
Current Liabilities
Notes payable
$ 659,604
Case C – Northern Lights Communications 2
Current portion of other notes payable
1,491,767
$3,320,197
Current portion of capital lease obligations
1,094,381
668,826
Accounts payable
310,358
835,384
Accrued telecommunications and other expenses
2,971,935
3,036,633
Income taxes payable
256,140
475,945
Total current liabilities
$ 6,784,185
$ 8,336,985
Long-term liabilities:
Notes payable, less current portion
$ 6,605,835
$10,030,963
Capital lease obligations
780,593
Deferred income tax liability
342,359
56,219
306,021
Total long-term liabilities
$ 7,728,787
$10,393,203
Preferred stock
$ 2,400,000
$ 2,400,000
Common stockholders’ equity:
Common Stock
$ 1,438,903
$ 1,438,903
Additional paid-in capital
10,630
10,630
Retained earnings
3,031,714
3,366,096
Total ownership equity
$ 4,481,247
$ 4,815,629
TOTAL DEBT AND EQUITY
$21,394,219
$25,945,817
Case C – Northern Lights Communications 3
Income Statements for Northern Lights Communications, Inc.
2010
2011
Sales Revenue
Pay-phone coin calls
$14,036,665
$17,615,069
Automated operator, routed calls
17,049,394
15,932,154
Other
505,581
1,363,738
Total revenues
$31,591,640
$34,910,951
Operating expenses:
Telephone charges
$ 7,851,842
$ 9,078,851
Commissions
4,909,445
5,627,288
Telecommunications fees
1,821,930
1,519,095
Depreciation and amortization
4,298,090
5,353,797
Field operations personnel
2,016,935
2,988,456
Chargebacks and doubtful accounts
1,104,896
1,111,857
General and administrative expenses
5,520,405
6,435,919
Total operating expenses
$27,523,543
32,115,263
Operating income
$ 4,068,097
$2,795,688
Other income (expenses):
Interest expense
($1,631,416)
($1,816,222)
Interest income
57,278
5,069
Losses on affiliates
( 34,608)
( 108,556)
Unusual gains
1,160,238
27,234
Total other income (expenses)
($ 448,508)
($ 1,892,475)
Income before taxes
$3,619,589
$ 903,213
Provision for income taxes
1,339,140
424,831
Net income
$2,220,449
$ 478,382
Case C – Northern Lights Communications 4
Questions
1. Using financial ratios, compare the firm’s financial performance for 2010 and 2011.
2. What do you think might have happened from 2010 to 2011?
Ratios of liquidity:
a. Current Ratio is equal to current assets divided by current liabilities in 2010: $5,670,996 x $6,784,185 = 0.836 in 2011: Current Ratio = $5,001,085 / $8,336,985 = 0.600 The current ratio decreased from 0.836 in 2010 to 0.600 in 2011, indicating a decline in the business's capacity to meet its short-term obligations.
b. Quick Ratio = Current Liabilities x (Current Assets - Inventories) in 2010 Quick Ratio = $6,784,185 x ($5,670,996 - $137,036) = 0.789 in 2011: The quick ratio also decreased from 0.789 in 2010 to 0.532 in 2011, indicating that the company's liquidity position deteriorated further. Quick Ratio = ($5,001,085 - $112,699) / $8,336,985 = 0.532
What are Liquidity Ratios?A group of financial ratios called liquidity ratios measures a company's capacity to pay off its liabilities and meet its short-term obligations by converting its assets into cash. A company's liquidity, or its capacity to meet its immediate financial obligations without experiencing financial distress or disruption, is shown by these ratios.
To know more about Liquidity Ratios, visit:
https://brainly.com/question/30992156
#SPJ1
What is psychological price adjustment and how do marketers use
this strategy to influence consumers? Illustrate your answer using
appropriate examples.
Psychological price adjustment is a pricing strategy used by marketers that seeks to influence customer perception of price and value.
This strategy is based on the idea that consumers often make purchasing decisions based on emotional and psychological factors, rather than objective facts or logic.
How to use psychological price adjustmentTo use psychological price adjustment to influence consumers, marketers use a variety of techniques such as pricing below round numbers, price anchoring, and the use of odd prices.
Let's take a closer look at each of these techniques. Pricing below round numbers:
This technique involves pricing products just below round numbers. For example, instead of pricing a product at $100, a marketer may price it at $99.99. This pricing strategy is based on the idea that consumers tend to perceive the product as being cheaper than it actually is due to the use of a lower price point.
Price anchoring: This technique involves highlighting a higher-priced product to make a lower-priced product seem more reasonable. For example, a marketer may display a $2000 television next to a $1000 television to make the lower-priced television seem like a bargain in comparison. Use of odd prices: This technique involves using prices that end in an odd number, such as $3.99 or $9.97. This strategy is based on the idea that consumers tend to perceive these prices as being significantly lower than round numbers, even when the actual difference is relatively small. One example of psychological price adjustment is the pricing of fast food meals. Marketers often use the technique of pricing below round numbers to make their products seem cheaper.For example, McDonald's may price a Big Mac meal at $6.99 instead of $7 to make it seem like a better deal. Another example is the use of odd prices in retail stores. A clothing store may price a shirt at $19.99 instead of $20 to make it seem like a better value.
Overall, psychological price adjustment is a powerful tool that can be used by marketers to influence customer perception of price and value. By using these techniques, marketers can encourage consumers to make purchasing decisions based on emotion and perception rather than objective facts.
Learn more about psychological pricing at
https://brainly.com/question/29735175
#SPJ11