# BUS640 Complete A+ course

**BUS640 week 1 Assignment**

Problem 1:

A generous university benefactor has agreed to donate a large amount of money for student scholarships. The money can be provided in one lump sum of $12 million in Year 0 (the current year), or in parts, in which $7 million can be provided at the end of Year 1, and another $7 million can be provided at the end of Year 2.

Describe your answer for each item below in complete sentences, whenever it is necessary. Show all of your calculations and processes for the following points:

Assuming the opportunity interest rate is 8%, what is the present value of the second alternative mentioned above? Which of the two alternatives should be chosen and why?

How would your decision change if the opportunity interest rate is 12%?

Provide a description of a scenario where this kind of decision between two types of payment streams applies in the “real-world” business setting.

Problem 2:

The San Diego LLC is considering a three-year project, Project A, involving an initial investment of $80 million and the following cash inflows and probabilities:

Year 0

Initial Investment $80 million discount rate 8%

Year 1 Probability .2 Cash flow $50 million, Probability .3 Cash flow $40 million,Probability .4 Cash flow $30 million,Probability .1 Cash flow $20 million

Year 2 Probability .1 Cash flow $60 million, Probability .2 Cash flow $50 million,Probability .3 Cash flow $40 million,Probability .4 Cash flow $30 million

Year 3 Probability .3 Cash flow $70 million, Probability .4 Cash flow $60 million,Probability .1 Cash flow $50 million,Probability .2 Cash flow $40 million

Describe your answer for each question in complete sentences, whenever it is necessary. Show all of your calculations and processes for the following points:

Describe and calculate Project A’s expected net present value (ENPV) and standard deviation (SD), assuming the discount rate (or risk-free interest rate) to be 8%. What is the decision rule in terms of ENPV? What will be San Diego LLC’s decision regarding this project? Describe your answer.

The company is also considering another three-year project, Project B, which has an ENPV of $32 million and standard deviation of $10.5 million. Project A and B are mutually exclusive. Which of the two projects would you prefer if you do not consider the risk factor? Explain.

Describe the coefficient of variation (CV) and the standard deviation (SD) in connection with risk attitudes and decision making. If you now also consider your risk-aversion attitude, as the CEO of the San Diego LLC will you make a different decision between Project A and Project B? Why or why not?

**BUS640 Week 2 Assignment**

** **

Consumer Demand Analysis and Estimation Applied Problems

Please complete the following two applied problems:

Problem 1:

Patricia is researching venues for a restaurant business. She is evaluating three

major attributes that she considers important in her choice: taste, location, and

price. The value she places on each attribute, however, differs according to what

type of restaurant she is going to start. If she opens a restaurant in a suburban

area of Los Angeles, then taste is the most important attribute, three times as

important as location, and two times as important as price. If she opens a

restaurant in the Los Angeles metropolitan area, then location becomes three

times as important as taste and two times as important as price. She is

considering two venues, respectively, a steak restaurant and a pizza restaurant,

both of which are priced the same. She has rated each attribute on a scale of 1 to

100 for each of the two different types of restaurants.

Attribute

Taste

Location

Price

Steak Restaurant

80

55

65

Pizza Restaurant

70

80

50

Show all of your calculations and processes. Describe your answer for each

question in complete sentences.

a. Which of the two options should Patricia pursue if she wants to open a

restaurant in a suburban area of Los Angeles? Calculate the total expected

utility from each restaurant option and compare. Graph is not required.

Describe your answer, and show your calculations.

b. Which of the two options should she pick if she plans to open a restaurant

in the Los Angeles metropolitan area? Describe your answer, and show

your calculations.

c. Which option should she pursue if the probability of finding a restaurant

venue in a suburban area can be reliably estimated as 0.7 and in a

metropolitan area as 0.3? Describe your reasoning and show your

calculations.

d. Provide a description of a scenario in which this kind of decision between

two choices, based on weighing their underlying attributes, applies in the

“real-world” business setting. Furthermore, what are the benefits and

drawbacks, if any, to this method of decision making?

Problem 2:

The demand function for Newton’s Donuts has been estimated as follows:

Qx = -14 – 54Px + 45Py + 0.62Ax

where Qx represents thousands of bagels; Px is the price per bagel; Py is the

average price per bagel of other brands of bagels; and Ax represents thousands

of dollars spent on advertising Newton’s Donuts. The current values of the

independent variables are Ax=120, Px=0.95, and Py=0.64.

Show all of your calculations and processes. Describe your answer for each

question in complete sentences, whenever it is necessary.

a. Calculate the price elasticity of demand for Newton’s Donuts and describe

what it means. Describe your answer and show your calculations.

b. Derive an expression for the inverse demand curve for Newton’s Donuts.

Describe your answer and show your calculations.

c. If the cost of producing Newton’s Donuts is constant at $0.15 per donut,

should they reduce the price and thereafter, sell more donuts (assuming

profit maximization is the company’s goal)?

d. Should Newton’s Donuts spend more on advertising?

Reference:

Douglas, E. (2012). Managerial Economics (1st ed.). San Diego, CA: Bridgepoint

Education.

**BUS640 week 3 Assignment**

** **

Production Cost Analysis and Estimation Applied Problems

Please, complete the following 3 applied problems in a Word or Excel document. Show all your

calculations and explain your results. Submit your assignment in the drop box by using the

Assignment Submission button.

1. Jennifer Trucking Company operates a large rig transportation business in Texas that

transports locally grown vegetables to San Diego, California. The company owns 5 large rigs and

hires local drivers paid fixed salaries monthly, regardless of the number of trips or tons of cargo

that each driver transports each month. The below table presents details about the number of

drivers and the total cargo transported by the company at different staff levels.

Drivers employed

Total Cargo Transported (tons)

1

5

2

12

3

21

4

32

5

40

6

46

7

51

8

50

a.

Which inputs are fixed and which are variable in the production function of Jennifer

Trucking Company? Over what ranges do there appear to be increasing, constant

and/or diminishing returns to the number of drivers employed?

b. What number of drivers appears to be most efficient in terms of output per driver?

c. What number of drivers appears to minimize the marginal cost of transportation

assuming that all drivers are paid the same salary?

1. 2. The Palms Dry Cleaning Shop in Fort Lauderdale, Florida, faces a highly seasonal demand for

its services, as the snow-birds retirees flock to Florida in mid-fall to enjoy the mild winter

weather and then return to their main homes in mid-spring. Given this seasonality, Palms tries to

keep the overhead costs as low as possible and therefore, often uses seasonal contracted labor to

man its operations. The following table shows the labor costs in each month of operation over the

past 12 months as well as the total number of garments that were dry-cleaned in each month.

Palms pays fixed wages per hour to each employee, and we can assume that the costs of other

variable inputs (such as chemicals, electricity, etc) have remained constant.

Month

June

July

August

September

October

TVC ($)

35,490

42,470

48,980

52,530

37,480

Garments cleaned

4,500

5,575

6,300

6,525

5,325

November

December

January

February

March

April

May

33,510

31,850

27,860

22,160

19,520

25,960

4,050

2,850

2,450

1,525

925

1,925

32,980

3,500

a. Derive average variable cost (AVC) data from the data in this table.

b. Use gradient analysis to provide an estimate of eleven data points that seem to

represent the MC curve over this range of outputs. Plot these data points and sketch in

estimated MC and AVC curves that seem to best fit these data points.

c. Suppose that demand is estimated to move from its present (May) level of 3,500

units to 4,000 units next month (June). What is the incremental cost of meeting this

demand?

d. Assuming that Palm’s price to dry clean a garment has been constant at $15 over the

past year, and will remain at that level, what contribution to overheads and profit can

it expect in June?

2. 3. Over the past 12 months the Four Winds Novelty Company firm has recorded its internet sales

(equals monthly output levels) and its monthly total variable costs (TVC) for a particular novelty

item as shown in the following table. Sales have grown over this period with relatively few

shocks due to uncontrollable weather, political and sporting events. This online retailer carries no

inventories; when it receives a pre-paid on-line order from a customer, it simply buys the product

from a supplier and ships it out to the customer.

Sales = Output

TVC ($)

102,813

201,953

176,163

340,608

196,121

377,940

222,885

432,863

226,356

441,714

296,416

629,267

378,446

867,596

450,666

1,103,807

579,696

1,701,125

607,082

1,917,861

624,680

2,195,352

636,133

2,479,195

a.

Using regression analysis, find an equation that best fits the data to represent the

TVC function.

b. At what sales/output level will marginal costs (MC) reach a minimum?

c. Estimate the value of TVC for sales/output level 250,000 units, and calculate the

95% confidence interval for your estimate.

**BUS640 week 4 Assignment**

** **

Market Structures and Pricing Decisions Applied Problems.

Please complete the following two applied problems:

Problem 1:

Robert’s New Way Vacuum Cleaner Company is a newly started small business that

produces vacuum cleaners and belongs to a monopolistically competitive market. Its

demand curve for the product is expressed as Q = 5000 – 25P where Q is the number of

vacuum cleaners per year and P is in dollars. Cost estimation processes have determined

that the firm’s cost function is represented by TC = 1500 + 20Q + 0.02Q2.

Show all of your calculations and processes. Describe your answer for each question in

complete sentences, whenever it is necessary.

a. What are the profit-maximizing price and output levels? Explain them and calculate

algebraically for equilibrium P (price) and Q (output). Then, plot the MC (marginal

cost), D (demand), and MR (marginal revenue) curves graphically and illustrate the

equilibrium point.

b. How much economic profit do you expect that Robert’s company will make in the

first year?

c. Do you expect this economic profit level to continue in subsequent years? Why or

why not?

Problem 2:

Greener Grass Company (GGC) competes with its main rival, Better Lawns and Gardens

(BLG), in the supply and installation of in-ground lawn watering systems in the wealthy

western suburbs of a major east-coast city. Last year, GGC’s price for the typical lawn

system was $1,900 compared with BLG’s price of $2,100. GGC installed 9,960 systems, or

about 60% of total sales and BLG installed the rest. (No doubt many additional systems

were installed by do-it-yourself homeowners because the parts are readily available at

hardware stores.)

GGC has substantial excess capacity–it could easily install 25,000 systems annually, as it

has all the necessary equipment and can easily hire and train installers. Accordingly, GGC

is considering expansion into the eastern suburbs, where the homeowners are less wealthy.

In past years, both GGC and BLG have installed several hundred systems in the eastern

suburbs but generally their sales efforts are met with the response that the systems are too

expensive. GGC has hired you to recommend a pricing strategy for both the western and

eastern suburb markets for this coming season. You have estimated two distinct demand

functions, as follows:

Qw =2100 – 6.25Pgw + 3Pbw + 2100Ag - 1500Ab + 0.2Yw

for the western market and

Qe = 36620 - 25Pge + 7Pbe + 1180Ag - 950Ab + 0.085Ye

for the eastern market, where Q refers to the number of units sold; P refers to price level; A

refers to advertising budgets of the firms (in millions); Y refers to average disposable

income levels of the potential customers; the subscripts w and e refer to the western and

eastern markets, respectively; and the subscripts g and b refer to GGC and BLG,

respectively. GGC expects to spend $1.5 million (use Ag = 1.5) on advertising this coming

year and expects BLG to spend $1.2 million (use Ab = 1.2) on advertising. The average

household disposable income is $60,000 in the western suburbs and $30,000 in the eastern

suburbs. GGC does not expect BLG to change its price from last year because it has

already distributed its glossy brochures (with the $2,100 price stated) in both suburbs, and

its TV commercial has already been produced. GGC’s cost structure has been estimated as

TVC = 750Q + 0.005Q2, where Q represents single lawn watering systems.

Show all of your calculations and processes. Describe your answer for each item below in

complete sentences, whenever it is necessary.

a. Derive the demand curves for GGC’s product in each market.

b. Derive GGC’s marginal revenue (MR) and marginal cost (MC) curves in each

market. Show graphically GGC’s demand, MR, and MC curves for each market.

c. Derive algebraically the quantities that should be produced and sold, and the prices

that should be charged, in each market.

d. Calculate the price elasticities of demand in each market and discuss these in

relation to the prices to be charged in each market.

e. Add a short note to GGC management outlining any reservations and qualifications

you may have concerning your price recommendations.

Reference:

Beggs, J. (No Date). Cost Curves Part 2 – Average and Marginal Costs. Retrieved from

the web 24 November 2013 from http://economics.about.com/od/production/ss/CostCurves-Part-2-Average-and-Marginal-Costs_2.htm

Douglas, E. (2012). Managerial Economics (1st ed.). San Diego, CA: Bridgepoint

Education.

Moffatt, M. (No Date). How to Understand and Calculate Cost Measures Using Cost

Data From a Non-Linear Equation. Retrieved from the web 24 November 2013 from

http://economics.about.com/cs/studentresources/a/costs_3.htm

**BUS640 week 5 Assignment**

** **

1. Your company, Bright Paints, is one of a dozen companies manufacturing a special reflective paint used for traffic signs. The State Department of Transportation has called for tenders to supply 10,000 gallons of blue reflective paint to be delivered within two months. You can foresee fitting in a production run of the blue paint and have decided to bid on the job. You calculate your incremental costs for this job to be $76,200. This particular contract is standard, similar in all in respects to hundreds of contracts you have bid on over the past few years. Your pricing policy has been to apply a mark-up to incremental costs to arrive at the bid price. Your mark-up has been higher when you had plenty of orders and lower when you had few or no orders to fulfill. You have assembled data relating the mark-up rate used and the percentage of contracts won at each mark-up rate, as follows.

Mark-up rate (%) Percentage of contracts won at that rate (%)

0 95.9

10 84.8

15 65.4

20 41.3

25 15.7

30 3.0

35 0

A. Why would your company have bid with a zero mark-up on some past tenders? Why didn’t it win all of those contracts?

b. What is the bid price that maximizes the expected contribution of the contract?

c. Why, or why not, is the fixed-price mode of bidding likely to be the best one to use for this contract?

2. In calculating the incremental cost of a particular project, how would you treat the possible future costs of a lawsuit that may occur as a result of this project, where the cost of the lawsuit might range from $10,000 to $500,000 with an associated probability distribution?

**BUS640 Week 6 Paper(Wal-Mart)**

** **

Managerial Decision Making Research and Analysis

Research a specific company of your choice and identify some of the managerial decisions that were made over time and in response to changes in its market or competitive environment. Use Ashford University Online library and web-based resources for your research. At least 3 external resources must be used. Address all of the following areas:

Focus of the Final Paper

Describe the company and provide a brief history of its operations. Find or use graphs to illustrate its financial performance over the years.

Identify any sources of risk or uncertainty in its operations. Do the financial reports indicate risky or uncertain activities or changes to the economic environment that ultimately appear to have affected the company’s financial outcomes? Be specific.

Are there any government regulations that have affected this company’s operations domestically or abroad? Explain.

Describe the inputs that are used in this company’s production function and identify any challenges to securing these inputs.

Determine if the company has introduced new products in existing markets or created new markets over time. What is the impact on its finances?

Determine if the price of its products increased or declined over time and analyze the reasons for price fluctuations. Study the demand elasticity for its products and discuss the availability of close substitutes for its products. How does that affect pricing decisions?

Analyze the company’s profitability. Identify the economy or industry influences on its costs, operations, and profitability.

Describe the competitive environment in which the firm operates, the distribution of market power, and the strategic behavior of the firm and its competitors. Apply your knowledge of the theory of this company’s market structure. How does the company make pricing and production decisions? Is your observation supported by the theoretical models? Refer to the financial reports for illustration.

Identify any non-price competitive strategies that the company might be engaging in? Provide specific examples.

Evaluate if the company made any mistakes in its decisions over time, and recommend any changes or improvements for the future operations. Refer to the financial reports when making specific observations or recommendations.

Use economic language and demonstrate your understanding of the concepts and theories of this course.

Writing the Final Paper

The Final Paper:

1. Must be 8 to 10 double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center.

2. Must include a title page with the following:

a. Title of paper

b. Student’s name

c. Course name and number

d. Instructor’s name

e. Date submitted

3. Must begin with an introductory paragraph that has a succinct thesis statement.

4. Must address the topic of the paper with critical thought.

5. Must end with a conclusion that reaffirms your thesis.

6. Must use at least 3 scholarly sources.

7. Must document all sources in APA style, as outlined in the Ashford Writing Center.

8. Must include a separate reference page, formatted according to APA style as outlined in the Ashford Writing Center.

Purchase the answer to view it