MGMT 3008 Case Study: Eli Lilly India1. Key issues Eli Lilly is dealing withEli Lilly, founded in 1876, is a significant American pharmaceutical firm that ranks in the top 10 globally in terms of income it is facing a few difficulties in the Indian market, including but not limited to the following.
Low Purchasing Power: India is a developing country with a population of over 1.3 billion people, most of whom have a low standard of living. This implies that the cost of drugs is a significant problem for most people, and the majority of people may not afford medicines from high-end pharmaceuticals.Piracy and counterfeit drugs: India has a long-standing problem with counterfeit drugs, with an estimated 25% of drugs sold in India being fake or counterfeit.
It is a challenging issue for Eli Lilly because the company has invested a lot in research and development to produce new medications and guarantee their efficacy and safety.Competition: India is a competitive market, and other pharmaceutical firms have already established a strong presence in the Indian market. Eli Lilly will have to compete with these companies to penetrate the Indian market.2. Yes, Eli Lilly pursued the right strategy to penetrate the Indian market.
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You are considering a new product launch. The project will cost $820,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 160 units per year, price per unit will be $16,300, variable cost per unit are projected to be $11,000, and fixed costs are projected to be $535,000 per year. The required return on the project is 14 percent, and the relevant tax rate is 21 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ±5 percent. a.What are the best and worst case NPVs with these projections? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the sensitivity of the NPV to changes in fixed costs? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a. The best case NPV is $392,961.92 and the worst case NPV is -$172,369.42.
b. The base-case NPV is $110,296.25.
c. The sensitivity of the NPV to changes in fixed costs is -$28,267.63.
a. The best case NPV for the project is $392,961.92, while the worst case NPV is -$172,369.42. These values represent the potential net present value of the project under optimistic and pessimistic scenarios, respectively. The best case NPV indicates the highest expected profitability, while the worst case NPV suggests a potential loss.
b. The base-case NPV is $110,296.25. This represents the expected net present value of the project based on the given projections for unit sales, price, variable costs, fixed costs, and the required return on the investment. The base-case NPV serves as a benchmark for evaluating the project's profitability and determining its feasibility.
c. The sensitivity of the NPV to changes in fixed costs is -$28,267.63. This indicates the impact of variations in fixed costs on the net present value of the project. A negative sensitivity value implies that an increase in fixed costs would lead to a decrease in the NPV, while a decrease in fixed costs would result in an increase in the NPV. Understanding the sensitivity of the NPV helps assess the project's risk and the importance of controlling fixed costs to maintain profitability.
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Question 5
Find the 9th term for the following sequence
1-1.3-9,27)
The 9th term of the sequence is 19683.
To find the 9th term of the given sequence
we need to determine the pattern or rule followed by the sequence.
Each term is obtained by multiplying the previous term by a constant factor.
The pattern in this sequence is that each term is obtained by multiplying the previous term by -3.
Starting with the first term 1 we multiply it by -3 to get the second term -3.
Then we multiply -3 by -3 to get the third term 9.
Finally we multiply 9 by -3 to get the fourth term (- 27).
To find the 9th term
we need to keep multiplying the previous term (-27) by -3 for a total of 8 times since we want the 9th term.
(-27) x (-3) x (-3) x (-3) x (-3) x (-3) x (-3) x (-3) x (-3) = 19683
Therefore, the 9th term of the sequence is 19683.
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1- Create one example for each case: a) Speculation: Create a financial situation where using (at least) short-selling of European put options is preferable to holding a portoffio of long positions in the stock (assume a budget of $1000, stock price today S(0) = 200 and put option premium = $40). Show a proper graph for this example.
b) Repeat a) with the objective of Hedging. Show a proper graph for this example.
Suppose you expect a significant decline in the stock price. By short-selling European put options, you can profit from the stock's decline without actually owning it.
If you buy 25 put options at a premium of $40 each, the total cost would be $1000. Each put option gives you the right to sell one share of the stock at a predetermined price (strike price) within a specific timeframe. Let's assume the strike price is $180, which is below the current stock price of $200.Assume you own a portfolio of long positions in the stock and want to protect against potential losses. By purchasing European put options, you can hedge your portfolio's downside risk. Using the same parameters as above, buying 25 put options at a premium of $40 each would cost $1000.If the stock price declines below the strike price ($180), the put options provide a profit that can offset the losses in your long positions.By purchasing European put options as a hedging strategy, you can protect your long positions from potential losses.
The put options act as insurance against adverse price movements, providing a cushion to offset the declines in your portfolio.
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Given the following:
• Stock equals 100
• Stock volatility of 40%
Debt maturity of 5 years
• Debt Face value of 150
• Risk-free rate of 3%
Use Merton's model to find the asset value and asset volatility?
What is the risk-neutral probability of default over the debt's maturity and the annualized default probability?
What is the market spread for the debt?
What is the implied Recovery Rate?
Merton's model is a structural model used to evaluate the risk of default of a business or company.
The Merton Model is utilized to determine the risk-neutral probability of default of a company or business with debt.
This model is based on the Black-Scholes model and is used to identify the value of a company's assets while taking into account its debt.
The formula for Merton's model is: = (1) − (2)
Where: V = the value of the assets S = the stock price N(d) = the cumulative normal distribution functiond1 = [ln(S/B) + (r + σ²/2)t]/σ√td2 = d1 - σ√t
Where :
r = the risk-free interest rateσ = the volatility of the underlying asset
B = the face value of debt
T = the time to maturity Asset value and
Asset Volatility:
The following data is given:
Stock price (S) = 100Stock volatility (σ) = 40%Risk-free rate (r) = 3�bt face value (B) = 150Debt maturity (T) = 5 years
The calculation of the asset value and asset volatility is shown below:1 = [ln(100/150) + (0.03 + (0.4²)/2)5]/(0.4√5) = -0.852 = -0.85 - 0.4√5 = -2.76 (1) = 0.1987 (2) = 0.0033 = 100 (0.1987) - 150 (0.0033) = $17.74 = 100(0.4)√0.1987 = 25.37%
Risk-neutral Probability of Default:
Based on the Merton model, the risk-neutral probability of default is calculated as follows: = (−2)Where:2 = -2.76 (-2) = 0.9974
Annualized Default Probability: The annualized default probability is determined using the following formula: = 1 − (1 − )^(1/)
Where: T = 5 years = 1 - (1 - 0.9974)^(1/5) = 19.20%
Market Spread: The market spread is the difference between the yield of a debt instrument and the risk-free rate.
Based on the provided data, the risk-free rate (r) is 3%.
Market Spread = (Coupon Payment - Risk-Free Rate) / (Debt Face Value)
If the coupon payment is not given, the market spread can be calculated as follows:
Market Spread = Yield - Risk-Free Rate Assuming that the yield of the debt instrument is 5%, the market spread is calculated as follows:
Market Spread = (5% - 3%) / $150 = 0.0133 or 1.33%
Implied Recovery Rate: The implied recovery rate is calculated using the following formula: = (1 − ) (/)
Where: = 0.9974 = $150 = $17.74 = (1 - 0.9974) (150/17.74) = 42.14%.
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Describe the damage to Nestle’s reputation following the
decision to market infant formula in third-world countries.
Nestle's reputation suffered significantly due to the decision to market value by using infant formula in third-world countries.
The aggressive marketing practices employed by the company in these regions led to negative consequences, including damage to Nestle's reputation as well as health risks for infants.
Nestle faced allegations of unethical marketing and aggressive promotion of infant formula, which undermined breastfeeding practices and had adverse effects on the health of infants in developing countries. The company was accused of creating a false perception that formula feeding was superior to breastfeeding, targeting vulnerable populations with misleading advertising, and providing inadequate education on proper formula preparation and use.
The repercussions were severe, as Nestle faced boycotts, protests, and legal challenges from advocacy groups and concerned individuals. The company's reputation suffered due to the perception that it prioritized profit over the well-being of infants and their families. Nestle's actions drew widespread criticism from the international community, leading to increased scrutiny of its marketing practices and calls for stricter regulations in the infant formula industry.
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In this assignment, I would like for you to critically explain the importance and practical applications/implications of ‘Time Value of Money.’ How can it be applied to your personal financial decisions and how can firms use it to make informed strategic investment decisions?
Make sure to include Numerical /computational examples.
Time Value of Money (TVM) is an important concept for individuals, businesses, and institutions to understand when making financial decisions. TVM states that money today is worth more than the same amount of money in the future, due to factors such as interest rates and inflation.
For individuals, TVM can be used to make informed investment decisions. For example, if you have 10,000 to invest, you could choose to invest it in a savings account that earns 1% interest or an investment that earns 5% interest. Over 10 years, your money would grow to 11,047 in the savings account, but to 16,386 in the investment account.
Similarly, businesses can use TVM to determine the value of future cash flows and make informed investment decisions. For example, a business that is considering investing 1,000,000 in a new project can use TVM to determine that the project's net present value is 876,089 at a 5% discount rate. This means that the investment is expected to earn the company a return of 12.39%.
Overall, TVM is a valuable tool for individuals and businesses to understand and use when making financial decisions. By understanding the concept of TVM, you can make more informed choices about how to invest your money and grow your wealth.
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ond interest payments before and after taxes Charter Corp. issued 2,457 debentures with a $1,000 par value and 9% coupon rate. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter pays a 21% corporate tax, what is the company's net after-tax interest cost associated with this bond issue? a. The dollar amount of interest per bond an investor can expect to receive each year from Charter is $ (Round to the nearest dollar.) b. Charter's total interest expense per year associated with this bond issue is $ (Round to the nearest dollar.) c. Assuming that Charter is in a 21% corporate tax bracket, the company's net after-tax interest cost associated with this bond issue is $ (Round to the nearest dollar.)
a. The dollar amount of interest per bond an investor can expect to receive each year from Charter is $90 (9% of $1,000). This is calculated by multiplying the coupon rate (9%) by the par value of the bond ($1,000).
b. Charter's total interest expense per year associated with this bond issue can be calculated by multiplying the number of debentures (2,457) by the dollar amount of interest per bond ($90). This results in a total interest expense of $221,130 (2,457 x $90).
c. Assuming that Charter is in a 21% corporate tax bracket, the company's net after-tax interest cost associated with this bond issue is calculated by subtracting the tax savings from the total interest expense. The tax savings can be determined by multiplying the total interest expense ($221,130) by the corporate tax rate (21%). The net after-tax interest cost is then the total interest expense minus the tax savings.
Let's calculate the tax savings:
Tax savings = Total interest expense x Corporate tax rate
Tax savings = $221,130 x 21% = $46,337.30
Net after-tax interest cost = Total interest expense - Tax savings
Net after-tax interest cost = $221,130 - $46,337.30 = $174,792.70
Therefore, the company's net after-tax interest cost associated with this bond issue is $174,793 (rounded to the nearest dollar).
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please create a cost and price analysis for a cosmetic brand.
(200+ words please thank you)
By conducting a comprehensive cost and price analysis, a cosmetic brand can make informed decisions regarding pricing strategies, product profitability, and market positioning. It enables the brand to strike a balance between offering competitive prices to attract customers while ensuring profitability and sustainability in the long run.
A cost and price analysis for a cosmetic brand involves evaluating various factors to determine the costs incurred in producing the cosmetics and setting appropriate prices. The analysis includes:
1. Cost Analysis: Assessing the expenses involved in the production process, including raw materials, packaging, manufacturing, labor, and overhead costs. This analysis helps identify the total cost per unit for each cosmetic product.
2. Market Research: Conducting thorough market research to understand customer preferences, demand, and pricing trends in the cosmetic industry. This information helps in setting competitive prices and determining the target market segment.
3. Competitor Analysis: Studying competitor pricing strategies, product offerings, and market positioning. This analysis provides insights into how the brand's prices can be positioned in relation to competitors while maintaining profitability.
4. Profit Margin Calculation: Determining the desired profit margin for the cosmetic brand. This involves considering factors such as brand positioning, market share goals, and long-term business sustainability.
5. Pricing Strategy: Developing a pricing strategy that aligns with the brand's value proposition, target market, and product differentiation. The strategy may include penetration pricing, skimming pricing, or value-based pricing, depending on the brand's objectives.
6. Price Testing: Conducting price testing experiments to evaluate customer response and elasticity to different price points. This helps in optimizing prices for maximum revenue and profitability.
7. Price Adjustment: Regularly reviewing and adjusting prices based on market dynamics, cost fluctuations, and changes in customer demand. This ensures the brand remains competitive and financially viable over time.
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Using your organization or any organization you are familiar with, assess how inventory affects return on assets.Using your organization or any organization you are familiar with, assess how inventory affects return on assets. [1000 words]
Inventory is an essential part of an organization, and it has a significant impact on the return on assets of the organization.
What does it entail?It is an asset that is held by the organization to meet the demand of the customer in a timely and efficient manner. However, holding too much inventory for a long time can affect the return on assets negatively, while holding too little inventory can impact customer satisfaction and sales.
Walmart is a multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores. The company deals with a vast array of products, from apparel to electronics, household goods, and groceries.Walmart has managed to maintain its position in the market as the largest retail store in the world through effective inventory management. Walmart's inventory turnover rate is one of the highest in the retail industry, which has contributed significantly to its high return on assets.Inventory turnover measures how often a company's inventory is sold and replaced over a specific period. Walmart has maintained a high inventory turnover rate, which implies that the company efficiently manages its inventory levels. By ensuring that products move off the shelves quickly, Walmart can replace inventory promptly with new stock, reducing the risk of obsolescence, spoilage, or damage to goods. As a result, Walmart's return on assets is high, and the company has managed to maintain its profitability over the years.To summarize, effective inventory management is essential for any organization's success, and it has a significant impact on return on assets.
Holding too much inventory can result in a decline in profits, while holding too little inventory can lead to loss of sales and customer dissatisfaction.
Therefore, organizations must maintain optimal inventory levels to ensure they are meeting customer demand while still maximizing their profits.
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Compute the cost of the ending inventory under the average-cost method, assuming there are 360 units on hand. (Round answer to o decimal places, e. G. 1,250. ) The cost of the ending inventory =_____
The cost of the ending inventory under the average-cost method, with 360 units on hand, cannot be determined without additional information.
To calculate the cost of the ending inventory using the average-cost method, we need to know the cost per unit of the inventory items. The average-cost method assumes that the cost of each unit in inventory is the average cost of all units available for sale.
Without knowing the cost per unit, it is not possible to determine the cost of the ending inventory. Once the cost per unit is known, we can multiply it by the number of units in the ending inventory to calculate the total cost.
Please provide the cost per unit to compute the cost of the ending inventory accurately.
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The past five monthly returns for Kohls are 3.78 percent, 4.22 percent, -1.92 percent, 19.37 percent, and -2.80 percent. What is the average monthly return? (Round your answer to 3 decimal places.) Av
The average monthly return of Kohls is 4.53 percent (rounded to 3 decimal places).
To determine the average monthly return of Kohls given the following data 3.78 percent, 4.22 percent, -1.92 percent, 19.37 percent, and -2.80 percent, we'll need to use the formula for calculating the arithmetic mean.
The arithmetic mean is the value obtained by adding up all the data points and dividing the sum by the total number of data points. The formula for arithmetic mean is given as:
Arithmetic mean = Sum of all values / Total number of values
To calculate the average monthly return, we'll substitute the values into the formula for calculating the arithmetic mean. For the given data:
Total number of values, n = 5
Sum of all values = 3.78 + 4.22 - 1.92 + 19.37 - 2.80
= 22.65
Average monthly return = Sum of all values / Total number of values
= 22.65 / 5
= 4.53
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Suppose I have two equities, X and Y, that each have mean excess returns of µX and µY respectively, and the
standard deviations of their excess returns are σX and σY respectively. In addition, suppose that they are perfectly negatively correlated so rhoXY = −1. Show that it is possible to have a zero variance portfolio.
A zero variance portfolio is a portfolio that has no variance or standard deviation, meaning that its expected returns and risks are the same regardless of the securities held in the portfolio.
The most basic way to construct a zero variance portfolio is to take two assets with perfect negative correlation that are allocated in proportions equal to their weightings in the portfolio. In the case of two equities, X and Y, if they are assumed to have zero correlation then their returns will vary with changes in the market independently of each other.
The portfolio mean return of a perfectly negatively correlated portfolio is equal to the weighted average of the two securities’ mean returns, and the portfolio variance is equal to the sum of the variances of each security’s excess return. If we assume that the portfolio is equally weighted in both securities and that the two assets have perfect negative correlation, then the portfolio variance will be zero.
For our two equities, X and Y, if their mean returns and standard deviations are given, then we know the portfolio return and variance. We can find the optimal portfolio weights in order to achieve a zero variance portfolio. To do this we use the equation of the portfolio variance (σP^2)=x^2+y^2−2xy, where xy is the correlation coefficient. Setting the portfolio variance to zero, we can solve for the optimal portfolio weights in each security. For example, if x=1, y=2, and xy=−1, then the optimal portfolio weights of each security would be x=y=1/2, resulting in a zero variance portfolio.
A zero variance portfolio is a theoretically interesting concept because it provides an optimal portfolio of risk and return. For two equities with perfect negative correlation, it is possible to construct a portfolio that has maximum return for no additional risk.
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Undertake a SWOT and PESTLE analysis on McDonal's and use the
results to analyse the main e-commerce related opportunities and challenges it has
faced because of the COVID-19 pandemic and evaluate how successfully it has
addressed these
Examine how the growth in sales and/or customer base has posed supply chain
challenges for McDonal's and the ways in which it has sought to
overcome these challenges in order to provide high levels of service and
fulfilment
Using your research, identify TWO (2) social media channels that McDonal's
uses to help develop its online communities. Explain the reasons why each of these
TWO (2) channels have been selected and the benefits they provide in terms of
achieving enhanced communication and interaction with these
communities.
Identify whether the McDonal's site has an SSL (Secure Sockets
Layer) certificate AND if its payment systems are PCI DSS (Payment Card Industry
Data Security Standard) compliant. Define the key characteristics of both features
and discuss how they can help customers to have confidence in the security of the ecommerce
site.
Using your research, identify and briefly describe TWO (2) features of McDonal's that you believe are particular strengths in terms of meeting the
needs and expectations of the site’s target audience(s), detailing the reasons for
your choice.
SWOT Analysis of McDonald's Strengths is one of the most well-known fast-food chains globally, with a large number of loyal customers. McDonald's has a large range of food items, including vegetarian and vegan options, as well as non-beef burgers.
The organization has a strong brand image and offers high-quality service to its consumers. The brand has also been successful in establishing a loyal fan base by sponsoring major sporting events and concerts. Weaknesses The food quality may be seen as subpar when compared to a sit-down restaurant, resulting in lower quality and lesser pricing. Since McDonald's is a franchise business, the level of control varies greatly between restaurants. Many people would argue that the food is unhealthy and does not provide much nutritional value.
Opportunities McDonald's may expand its product offerings in the future, including healthier food options and eco-friendly packaging. They may also provide better dining environments to increase their consumers' overall experience. Given the current trend in technology, McDonald's could launch an e-commerce service that allows customers to order and pay online. Threats Health concerns such as obesity and heart disease, as well as consumers' growing interest in eating healthily, could lead to lower sales of fast food.
Other fast-food chains may begin to provide a more sustainable and eco-friendly experience for their customers. COVID-19 could have a negative impact on the fast-food industry as a whole. PESTLE Analysis of McDonald's Political is subjected to government regulations and legislation that govern the operation of fast-food establishments. Economic The fast-food sector is often affected by economic fluctuations.
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Consider the following statement. "Strong prices traditionally cause expansion in an industry, eventually bringing an end to high prices and manufacturers’ prosperity." Assess the validity of this statement. Be sure to explain your reasoning. One or more diagrams might be helpful.
The statement suggests that strong prices traditionally lead to industry expansion, which ultimately ends high prices and brings prosperity to manufacturers. To assess the validity of this statement, we need to consider economic principles and the behavior of markets.
Traditionally, strong prices can indeed incentivize expansion in an industry. When prices are high, it becomes profitable for firms to enter the market or expand their production capacities. This increased supply can eventually lead to a decrease in prices, as competition intensifies.However, it is important to note that the relationship between strong prices and industry expansion is not a guarantee. Other factors, such as market dynamics, government regulations, and technological advancements, can influence the expansion of an industry. In terms of diagrams, a supply and demand curve graph can be helpful to illustrate the relationship between prices and industry expansion. Initially, when prices are high, the supply curve can shift to the right as firms enter the market. This can lead to a decrease in prices over time. However, the actual outcome may vary based on market conditions.
In conclusion, while the statement's suggestion about the relationship between strong prices, industry expansion, and the end of high prices is generally valid, it is important to consider various factors that can influence this relationship. Economic principles and market dynamics play a crucial role in determining the outcome.
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Let U(x,y) = ax + by represent the consumer's utility function. In this case, Goods x and y are considered "economic bads" since the consumer maximizes utility by allocating her income equally among both goods
True
False
The given statement "Goods x and y are considered 'economic bads' since the consumer maximizes utility by allocating her income equally among both goods" is False.
In this case, the utility function U(x, y) = ax + by represents the consumer's utility function. The consumer maximizes utility by allocating her income in a way that maximizes the total utility obtained from consuming goods x and y. This means that the consumer will allocate her income in such a way that maximizes the sum of ax + by.
Since there is no information given about the values of a and b, we cannot determine whether goods x and y are considered "economic bads" or not. The terms "economic bads" typically refer to goods that are considered to have negative utility or that are undesirable.
However, in this case, without further information, we cannot make any conclusions about whether goods x and y are economic bads or not based solely on the given utility function.
Therefore, the statement is false.
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Suppose you have the possibility to invest your money in a savings account that earns 6% interest compounded monthly. If you deposit $1,000 every month for 10 years, what would be the future value of this series? $163,879.35 $276,437.88 $267,501.39 $160,978.35
The future value of this series would be $276,437.88.
To calculate the future value of a series of monthly deposits, we can use the formula for the future value of an ordinary annuity:
FV = P * ((1 + r)^n - 1) / r
Where:
FV = Future Value
P = Monthly deposit
r = Monthly interest rate
n = Number of periods
In this case, the monthly deposit is $1,000, the monthly interest rate is 6% divided by 12 (0.06/12 = 0.005), and the number of periods is 10 years multiplied by 12 months (10 * 12 = 120).
Plugging these values into the formula, we get:
FV = 1000 * ((1 + 0.005)^120 - 1) / 0.005
≈ 276,437.88
Therefore, the future value of this series of monthly deposits would be approximately $276,437.88.
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Describe seven techniques for bootstrapping that you could use
if you started a company. please provide citations.
Bootstrap marketing relates to an advertising strategy usually used by entrepreneurs to create a business
Here are seven techniques for bootstrapping a company
1. Lean Startup Methodology: The Lean Startup Methodology emphasizes rapid experimentation and iteration to develop a product or service based on customer feedback. It involves building a Minimum Viable Product (MVP) and using validated learning to make data-driven decisions. (Source: Ries, E. (2011). "The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.")
2. Sweat Equity: Sweat equity refers to the contribution of time, effort, and skills by the founders and team members instead of relying on external funding. This involves dedicating personal resources and working long hours to reduce costs and retain control over the company. (Source: Beckman, C., & Burton, M. (2008). "Founding the Future: Path Dependence in the Evolution of Top Management Teams from Founding to IPO." Organization Science, 19(1), 3-24.)
3. Bootstrapping through Revenue Generation: Generating revenue from early customers or clients can help fund ongoing operations and growth. By focusing on sales and building a customer base, entrepreneurs can reduce the need for external financing. (Source: Mosey, S., & Wright, M. (2007). "From Human Capital to Social Capital: A Longitudinal Study of Technology-Based Academic Entrepreneurs." Entrepreneurship Theory and Practice, 31(6), 909-935.)
4. Bartering and Partnerships: Engaging in bartering or forming strategic partnerships can help reduce costs and gain access to resources or services without the need for cash. This approach involves exchanging goods or services with other companies or individuals to fulfill mutual needs. (Source: Hofstrand, D., & Ismet, S. (2013). "Bartering: Old Idea, New Way to Save Money." Iowa State University Extension and Outreach.)
5. Crowdfunding: Crowdfunding platforms allow entrepreneurs to raise capital from a large number of individuals who contribute smaller amounts of money. This method enables founders to validate their product or service, generate pre-orders, and gain early supporters while maintaining ownership and control. (Source: Belleflamme, P., Lambert, T., & Schwienbacher, A. (2014). "Crowdfunding: Tapping the Right Crowd." Journal of Business Venturing, 29(5), 585-609.)
6. Resource Optimization and Cost Cutting: Analyzing expenses, eliminating non-essential costs, and optimizing resource allocation can help stretch limited resources. By being frugal and making strategic choices, entrepreneurs can extend their runway and achieve more with less. (Source: Mullins, J. W., & Komisar, R. (2019). "Getting to Plan B: Breaking Through to a Better Business Model." Harvard Business Press.)
7. Bootstrapping through Personal Networks: Leveraging personal networks, such as friends, family, and colleagues, can provide access to resources, expertise, and potential customers. These networks can be tapped for support, advice, introductions, and even initial investment. (Source: Uzzi, B., & Spiro, J. (2005). "Collaboration and Creativity: The Small World Problem." American Journal of Sociology, 111(2), 447-504.)
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Growth Company's current share price is $19.95 and it is expected to pay a $1.25 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.4% per year.
a. What is an estimate of Growth Company's cost of equity?
b. Growth Company also has preferred stock outstanding that pays a $1.95 per share fixed dividend. If this stock is currently priced at $28.15, what is Growth Company's cost of preferred stock?
c. Growth Company has existing debt issued three years ago with a coupon rate of 6.2%. The firm just issued new debt at par with a coupon rate of 6.5%. What is Growth Company's pretax cost of debt?
of $19.6 million. If Growth Company's common and preferred shares are priced as in parts (a) and (b), what is the market value of Growth Company's assets?
e. Growth Company faces a 22% tax rate. Given the information in parts (a) through (d), and your answers to those problems, what is Growth Company's WACC?
d. Growth Company has 4.8 million common shares outstanding and 1.3 million preferred shares outstanding, and its equity has a total book value of $50.2 million. Its liabilities have a market value Note: Assume that the firm will always be able to utilize its full interest tax shield.
a. Cost of Equity = 6.28%
b. Cost of Preferred Stock = 6.92%
c. Pretax Cost of Debt = 6.46%
d. Market Value of Assets = $257.56 million
e. Growth Company's WACC is estimated to be 5.42%
The estimate of Growth Company's cost of equity can be calculated using the dividend discount model (DDM). The cost of equity represents the return required by investors for holding the company's equity. Using the DDM formula, the cost of equity can be estimated as follows:
Cost of Equity = Dividend / Share Price + Growth Rate
Cost of Equity = $1.25 / $19.95 + 4.4% = 6.28%
The cost of preferred stock can be calculated by dividing the fixed dividend by the market price of the preferred stock. The cost of preferred stock represents the return required by investors for holding the company's preferred stock. Using the given information, the cost of preferred stock can be calculated as follows:
Cost of Preferred Stock = Dividend / Share Price
Cost of Preferred Stock = $1.95 / $28.15 = 6.92%
The pretax cost of debt can be calculated by taking the weighted average of the coupon rates of the existing debt and the newly issued debt. Using the given information, the pretax cost of debt can be calculated as follows:
Pretax Cost of Debt = (Coupon Rate x Existing Debt) + (Coupon Rate x New Debt) / Total Debt
Pretax Cost of Debt = (6.2% x $50.2 million) + (6.5% x $19.6 million) / ($50.2 million + $19.6 million
Pretax Cost of Debt = $3.108 million + $1.274 million / $69.8 million = 6.46%
To calculate the market value of Growth Company's assets, we need to sum the market values of its equity and liabilities. Using the given information, the market value of assets can be calculated as follows:
Market Value of Assets = Market Value of Equity + Market Value of Liabilities
Market Value of Assets = ($19.95 x 4.8 million) + ($28.15 x 1.3 million) + $69.8 million = $257.56 million
The Weighted Average Cost of Capital (WACC) can be calculated by taking the weighted average of the cost of equity, cost of preferred stock, and the pretax cost of debt. Using the given information, the WACC can be calculated as follows:
WACC = (Equity Weight x Cost of Equity) + (Preferred Stock Weight x Cost of Preferred Stock) + (Debt Weight x Pretax Cost of Debt) x (1 - Tax Rate)
WACC = ($50.2 million / $257.56 million) x 6.28% + ($28.15 million / $257.56 million) x 6.92% + ($69.8 million / $257.56 million) x 6.46% x (1 - 22%)
WACC = 0.195 x 6.28% + 0.109 x 6.92% + 0.271 x 6.46% x 0.78 = 5.42%
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5. (POINTS: 25) A potential entrant is deciding whether to enter or not in a given market. Its decision takes into consideration the actions an incumbent firm can take, after its own decision. If the entrant opts not to enter, then its payoff is 2 and the incumbent's payoff is 6 . If the entrant opts to enter, then if the incumbent fights (that is, it implements an aggressive strategy to compete with the entrant) payoffs are 1 for both of them, and if the incumbent does not fight, then the entrant obtains a payoff of 4 , and the incumbent a payoff of 2. (a) (Points: 8) Draw the extensive form game representation of the game above. Remember to identify nodes, when each player plays (nodes), what actions are available (branches), and the payoffs associated to each path of actions. Answer: (b) (Points: 10) Use backwards induction to find the subgame perfect equilibrium of this game. Be specify about how you eliminate branches at every step, including drawing the resulting game and identifying each subgame. Answer: c) (Points: 7) Using your answer from the previous item, explain why if the incumbent's claim it will fight if the entrant opts to enter is a non-credible threat.
The incumbent's claim to fight if the entrant opts to enter is a non-credible threat because in the subgame perfect equilibrium, the incumbent does not choose to fight.
a) In the extensive form game representation, the entrant's decision to enter or not enter the market and the incumbent's decision to fight or not fight are depicted as nodes, with branches representing the available actions and payoffs associated with each path.
b) Using backwards induction, the subgame perfect equilibrium of the game can be found. By analyzing the game from the last stage back to the first stage, branches that are not optimal for the players can be eliminated. The resulting game tree will show the optimal strategies and payoffs for each player.
c) The incumbent's claim to fight if the entrant opts to enter is a non-credible threat because in the subgame perfect equilibrium, the incumbent does not choose to fight. By analyzing the game through backwards induction, it is clear that the incumbent's best strategy is not to fight, as it results in higher payoffs for both players. Therefore, the claim to fight is not credible because it is not in the incumbent's best interest to follow through with it.
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Firestopper Corp. is a small company looking at two possible capital structures. Currently, the firm is an all-equity firm with $1,200,000 in assets and 100,000 shares outstanding. The 'market value of each share is $12.00. The CEO of Firestopper is thinking of leveraging the firm by selling $600,000 of debt financing and retiring 50,000 shares, leaving 50,000 shares outstanding. The cost of debt is 5% annually, and the current corporate tax rate for Firestopper is 35%. The CEO believes that Firestopper will earn $100,000 per year before interest and taxes. Which of the statements below is TRUE? Shareholders will be better off by $0.26 per share under a firm with $600,000 in debt financing versus a firm that is all-equity. All-equity EPS is $0.65. All answers are correct. The leveraged EPS is $0.91.
the statement that the leveraged EPS is $0.91 is true. The correct answer is that the leveraged EPS is $0.91.
Firestopper Corp is a small firm that is currently all-equity with $1,200,000 in assets and 100,000 shares outstanding. The 'market value of each share is $12.00. Firestopper's CEO is considering leveraging the firm by selling $600,000 in debt financing and retiring 50,000 shares, leaving 50,000 shares outstanding. The cost of debt is 5% annually, and the current corporate tax rate for Firestopper is 35%.
Firestopper's CEO believes that the firm will earn $100,000 per year before interest and taxes (EBIT).Now we need to calculate the earnings per share (EPS) for the two capital structures and compare them.
Let's see:All Equity EPS = Earnings Available to Common Equity / Number of Shares Outstanding= ($100,000 x (1 - 35%)) / 100,000 shares= $65,000 / 100,000 shares= $0.65Leveraged
EPS = (Earnings Available to Common Equity - Preferred Dividends) / Number of Shares Outstanding= ([$100,000 x (1 - 35%)] - [$600,000 x 5%]) / 50,000 shares= ($65,000 - $30,000) / 50,000 shares= $35,000 / 50,000 shares= $0.70
Now we can see that EPS for a leveraged firm is higher than the all-equity firm.
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Return on investment (ROI) is determined by
Question 7 options:
dividing net income by owners' equity.
dividing net income by net sales.
dividing net income by total assets.
dividi
Return on investment (ROI) is determined by dividing net income by total assets.
Return on investment (ROI) is a financial metric used to assess the profitability and efficiency of an investment. It is calculated by dividing the net income generated by an investment by the total assets employed.
This ratio provides insight into how effectively an investment utilizes its resources to generate profits. By dividing net income by total assets, ROI reflects the percentage return earned on each unit of investment.
It is a crucial measure for investors and businesses to evaluate the profitability and effectiveness of their investments. A higher ROI indicates better performance and efficiency in generating returns, while a lower ROI may signal lower profitability or inefficiency in asset utilization.
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businessfinancefinance questions and answerscalculate the annual net premium and the monthly premium ! endowment insurance for a period of 35 years is issued to a person aged 25 years with the following condition : 1. annual premium payment for 10 years 2. if he dies within the insurance period, the compensation is 100,000,000,- 3.if he lives to a period of 35 years then every beginning of the
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Question: Calculate The Annual Net Premium And The Monthly Premium ! Endowment Insurance For A Period Of 35 Years Is Issued To A Person Aged 25 Years With The Following Condition : 1. Annual Premium Payment For 10 Years 2. If He Dies Within The Insurance Period, The Compensation Is 100,000,000,- 3.If He Lives To A Period Of 35 Years Then Every Beginning Of The
Calculate the annual net premium and the monthly premium !
Endowment Insurance for a period of 35 years is issued to a person aged 25 years with the following condition :
1. Annual premium payment for 10 years
2. If he dies within the insurance period, the compensation is 100,000,000,-
3.If he lives to a period of 35 years then every beginning of the beginning of the year gets payment of 2.500.000,- in the first year, 2.000.000,- in the second year,
1,500,000,- in the third year, 1,000,000,- from the 4th year onwards.
PLEASE EXPLAIN STEP BY STEP !!
COPY PASTING FROM ANOTHER ANSWER WILL BE REPORTED AND DOWNVOTED
The payment amounts are as follows: 2,500,000 in the first year, 2,000,000 in the second year, 1,500,000 in the third year, and 1,000,000 from the fourth year onwards.
To calculate the annual net premium and the monthly premium for the endowment insurance, we need to consider the premium payment period, the compensation in case of death, and the annual payments if the person lives to the end of the insurance period.
The annual net premium can be determined by dividing the total premium payment over the premium payment period. In this case, since the annual premium payment is made for 10 years, the annual net premium is the total premium payment divided by 10.
The monthly premium can be calculated by dividing the annual net premium by 12, as there are 12 months in a year.
For the compensation in case of death, the amount is fixed at 100,000,000.
If the insured person lives to the end of the 35-year insurance period, they will receive annual payments starting from the beginning of the first year.
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What is the present value of an annuity with an annual payment of $2,000, for 10 years if the opportunity cost is 8%? a. $13,420.16 b. $24,342.66 C. $32,540.93 d. $35,000.00
The present value of an annuity with an annual payment of $2,000, for 10 years if the opportunity cost is 8% is option C, $32,540.93.
An annuity is a financial product that pays out a fixed sum of money on a regular basis over a specified period. An annuity is made up of two phases:
the accumulation phase, during which the annuity grows, and the annuitization phase, during which it is paid out as a stream of payments.
In order to calculate the present value of an annuity, you need to use the formula:
PV = C[ (1 - (1 + r)-n)/ r]
Where:
PV is the present value of the annuity;
C is the payment made each year;
R is the interest rate; and
N is the number of payments made.
Here, we have:
PMT = $2,000
r = 8%
N = 10
Therefore,
PV = 2000[ (1 - (1 + .08)-10)/ .08]
= $32,540.93
Therefore, the correct is option C. $32,540.93.
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Select the correct statement: A conjunction fallacy is a multiplicative process in which a sequence of successful probabilities are multiplied. Adjustment, with anchoring, leads to overestimation of probabilities of success. Conjunction fallacies lead to anchoring. All the statements here are correct. When asked to multiply a series of numbers together, people often multiply the first few numbers and then extrapolate
The first statement is the best one out of all. The correct statement is "Adjustment, with anchoring, leads to overestimation of probabilities of success." A conjunction fallacy is a reasoning error in which people overestimate the likelihood of an event occurring by assuming that a series of events will occur together rather than independently.
A conjunction fallacy is a multiplicative process in which a sequence of successful probabilities are multiplied. People tend to believe that the more specific a scenario is, the more likely it is to happen. The use of heuristics, or mental shortcuts, is what leads to conjunction fallacies. Anchoring, which is an adjustment bias, is one of these shortcuts. Adjustment, with anchoring, leads to overestimation of probabilities of success. People tend to rely too heavily on the first piece of information they receive, known as the anchor, when estimating probabilities. As a result, their subsequent judgments are skewed in the direction of the anchor. Conjunction fallacies are frequently used in situations involving the legal system, such as when jurors are asked to assess the likelihood that a defendant committed a specific crime. These errors can also be found in the business world, such as when investors evaluate the possibility of a company's stock price rising to a certain level.
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110,000 112,895 117,312 140,533 95,000 177,500 120,303 139,590 173,987 130,000 133,821 144,269 150,000 145,885 105,000 93,600 130,273 70,000 113,834 117,817 Send data to Excel Salaries of Governors Here are the salaries (in dollars) of the governors of 25 randomly selected states, Construct a grouped frequency distribution with 7 classes. Part: 0/4 Part 1 of 4 4 The class width is X 115.331 150,000 What is the class width for a frequency distribution with 7 dasses? 142,542 166,891 137,092 10 LAMESHA V Expa 00
Therefore, the class width for the grouped frequency distribution with 7 classes is approximately $15,357.14.
To construct a grouped frequency distribution with 7 classes for the given data of governor salaries, we first need to determine the class width.
The class width is calculated by finding the range of the data and dividing it by the number of classes. In this case, we have 7 classes.
The range of the data is found by subtracting the smallest value from the largest value:
Range = Largest value - Smallest value
Range = $177,500 - $70,000
Range = $107,500
Next, we divide the range by the number of classes to find the class width:
Class Width = Range / Number of Classes
Class Width = $107,500 / 7
Class Width ≈ $15,357.14
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Why HR face challenges in recruiting fresh graduates in
Asia context? Give examples based on real-world
company located in Asia
Provide the citation of reference list
In the context of Asia, HR (Human Resources) departments may face challenges when recruiting fresh graduates. Some reasons for this include:
1. Lack of relevant skills and experience: Fresh graduates may not possess the specific skills or experience required for certain job roles, making it challenging for HR to find suitable candidates.
2. Language barriers: In some Asian countries, English may not be the first language.
This can pose a challenge when recruiting fresh graduates who may not have strong English proficiency, especially if the job requires communication with international clients or colleagues.
3. High competition for talent: Asian countries often have a large pool of fresh graduates competing for limited job opportunities.
This can make it difficult for HR to attract and select the best candidates, as they may have multiple job offers to consider.
4. Cultural fit: HR may face challenges in finding fresh graduates who align with the company's culture and values.
Different cultural backgrounds and expectations may affect how well a candidate fits into the organization's working environment.
Example: A real-world company located in Asia, such as a technology firm in India, may face challenges in recruiting fresh graduates. The company may require candidates with specific programming skills, but find it difficult to find graduates who have the necessary skills.
Additionally, language barriers may also arise if the job involves working with international clients.
Reference: While I cannot provide a specific citation or reference list as an AI, you can refer to industry reports, academic studies, or news articles on recruitment challenges faced by HR departments in Asia for more in-depth information on this topic.
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what are the factors to be considered to establish your organization in the present location?
Explain with correlation of your plant layout & design steps with your organization case study.
Note: pls consider organization as Aluminum foundry.
When establishing an aluminum foundry, factors such as raw material access, infrastructure, workforce availability, market access, regulations, and costs must be considered. The plant layout and design steps must optimize material flow and production processes, ensuring efficiency and safety in the case study.
When establishing an organization, such as an aluminum foundry, in a particular location, several factors need to be considered. These factors can vary depending on the specific requirements and nature of the organization. Here are some key factors to consider when selecting a location for an aluminum foundry:
1. Access to Raw Materials: Proximity to sources of raw materials, such as aluminum ore, is crucial. A location near mining sites or aluminum suppliers can reduce transportation costs and ensure a steady supply of raw materials.
2. Infrastructure and Utilities: Adequate infrastructure, including transportation networks, access to water and electricity, and waste management facilities, is essential for efficient operations.
3. Workforce Availability: Availability of skilled and unskilled labor with experience in the aluminum industry is important. Consider the local labor market, education and training facilities, and potential for workforce development.
4. Market Access: Consider the proximity to customers and markets. A location near industries that use aluminum, such as automotive or construction, can provide easier access to potential clients and reduce transportation costs.
5. Government Regulations and Incentives: Consider local regulations regarding environmental compliance, permits, zoning, and labor laws. Explore potential incentives and support provided by local governments to attract businesses.
6. Cost Factors: Evaluate the cost of land, construction, labor, taxes, and other expenses in the selected location. Compare and analyze these costs against the expected benefits and potential for growth.
Now, let's discuss the correlation of plant layout and design steps with an aluminum foundry case study:
In the case of an aluminum foundry, the plant layout and design steps are crucial for optimizing the production process and ensuring efficiency. The layout should be designed to minimize material handling, reduce bottlenecks, and streamline workflow. Here are some key steps and their correlation with the case study:
1. Identify Objectives: The organization's objectives, such as maximizing production capacity or optimizing material flow, should guide the plant layout design.
2. Gather Data: In the case of an aluminum foundry, data related to production requirements, equipment specifications, material flow, and safety regulations should be collected and analyzed.
3. Develop Alternative Layouts: Based on the data, various layout options should be explored, considering factors like process flow, material handling, equipment placement, and safety measures.
4. Evaluate Alternatives: Each layout option should be evaluated based on criteria like production efficiency, cost-effectiveness, utilization of space, and compliance with regulations.
5. Select the Best Layout: The layout that best aligns with the organization's objectives and provides the most benefits in terms of productivity, safety, and cost should be chosen.
6. Implement and Review: Once the layout is selected, it should be implemented, considering factors like equipment installation, material flow optimization, and safety measures. Regular review and adjustments should be made to ensure continuous improvement.
In the specific case of an aluminum foundry, the plant layout should take into account factors such as the flow of raw materials, casting processes, heat treatment, finishing, storage, and shipping areas. Proper zoning, ventilation systems, and safety measures should also be considered.
Overall, the plant layout and design steps are critical for optimizing the production process, ensuring smooth material flow, and maximizing efficiency in an aluminum foundry or any similar organization.
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Assume a firm’s inventory level of $17,500 represents 25 days'
sales.
a. What is the annual cost of goods sold?
(Use 365 days in a year. Do not round intermediate
calculations. Round your answer to
The annual cost of goods sold is $255,500.
To calculate the annual cost of goods sold, we need to determine the daily cost of goods sold and then multiply it by the number of days in a year.
a. First, we need to calculate the daily cost of goods sold by dividing the inventory level by the number of days:
Daily Cost of Goods Sold = Inventory Level / Number of Days
= $17,500 / 25
= $700
b. Next, we multiply the daily cost of goods sold by the number of days in a year (365) to get the annual cost of goods sold:
Annual Cost of Goods Sold = Daily Cost of Goods Sold * Number of Days in a Year
= $700 * 365
= $255,500
Therefore, the annual cost of goods sold is $255,500.
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Q. Suppose that the attribute fraction is 50%. This means that:
The relative risk is 50%
Among those who are exposed, 1 in 2 outcomes are due to the exposure
Among the population, 1 in 2 outcomes are due to exposure
The prevalence of exposure is 50% in the population
The correct interpretation of the attribute fraction being 50% is:
Among the population, 1 in 2 outcomes are due to the exposure.
This means that in the population being considered, 50% of the outcomes or events can be attributed to the specific exposure being discussed. It represents the proportion of outcomes in the population that can be associated with the exposure of interest.
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TRUE or FALSE: If the assumptions of the median voter model hold, the vote of the median voter for the amount of a local good to be provided will be allocatively efficient; that is, meet the Samuelson condition for efficient provision of a public good.
True. If the assumptions of the median voter model hold, the vote of the median voter for the amount of a local good to be provided will be allocatively efficient.
A public good is efficiently provided, according to the Samuelson condition, when the marginal social benefit (MSB) equals the marginal social cost (MSC). The median voter model makes the assumption that voters have single-peaked preferences, or that their preferences drop as they move away from the peak preference for a certain level of public benefit. The majority of voters' preferences are represented by the median voter, and the model assumes that the desire of the median voter will become policy.
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