Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Financial Management Expert

A corporation is trying to decide whether to open a new factory outlet store. The store will have high, medium, or low demand. Before it decides whether to open the store, the corporation can pay $6,000 immediately for a market survey. The market survey has a 0.19 probability of predicting ""high"" demand, a 0.23 probability of predicting ""medium"" demand, and a 0.58 probability of predicting ""low"" demand. If the survey predicts ""low"" demand, the corporation will NOT open the store. If the survey predicts ""high"" or ""medium"" demand, the corporation needs to determine whether or not to open the store. If the survey predicts ""high"" demand, there is a 0.56 probability the store will actually have high demand, a 0.3 probability the store will actually have medium demand, and a 0.14 probability the store will actually have low demand. If the survey predicts ""medium"" demand, there is a 0.36 probability the store will actually have high demand, a 0.28 probability the store will actually have medium demand, and a 0.36 probability the store will actually have low demand. If the corporation decides not to take the market survey, there is a 0.19 probability the store will have high demand, a 0.23 probability the store will have medium demand, and a 0.58 probability the store will have low demand. If the corporation decides to open a store, the immediate cost of opening the store is $630,000, and the store must remain open for exactly 4 years. If demand is high, the store will EARN $1.1 million for each year that the store is open. If demand is medium, the store will EARN $340,000 for each year that the store is open. If demand is low, the store will LOSE $144,000 for each year that the store is open. You should assume that demand remains the same for each year that the store is open. There is no salvage value, and you can ignore taxes. If the corporation decides not to open a store, the corporation has a net present worth = $0 minus the cost of the survey (if the corporation takes the survey). The corporation's MARR is 12%. The coopration will choose the alternative with the largest expected net present worth (NPW). What is the expected NPW of the best alternative?"

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92361338

Have any Question?


Related Questions in Financial Management

Question -discuss the role of a central bank in a country

Question - Discuss the role of a central bank in a country, particularly in implementing monetary policy. Comment on any regulatory requirements imposed on the central bank in performing their responsibilities. Comment o ...

We have seen that there are 3 phases discussion making and

We have seen that there are 3 phases (Discussion; Making and accepting proposals; and closing the deal), in the process. Please respond in about 300 words. Do we need to follow them in sequence, or can we be flexible bet ...

Discuss the following questions professional or trade

Discuss the following Questions : Professional or trade organizations can provide ethical guidelines for business or professionals within their selected organization. Research a professional or trade organization. Provid ...

Assignment the art of negotiationresearch a current

Assignment : The Art of Negotiation Research a current conflict or negotiation in progress from the last 6 months like peace talks in the Middle East, a corporate merger, a labor dispute, etc. Write a six to eight (6-8) ...

This week you are to research the issue of healthcare

This Week, you are to research the issue of healthcare charging and develop a charging policy for a healthcare institution that reflects current market trends. You should consider various methods of establishing this pol ...

1 activities of a company that require the spending of cash

1) Activities of a company that require the spending of cash are known as: A) Uses of cash. B) Cash on hand. C) Cash receipts. D) Sources of cash. E) Cash collections. 2) Relationships determined from a firm's financial ...

Unit 3 dbthe president of eec recently called a meeting to

Unit 3 DB The President of EEC recently called a meeting to announce that one of the firm's largest suppliers of component parts has approached EEC about a possible purchase of the supplier. The President has requested t ...

Assignmentdescribe a work task a hobby or another activity

Assignment Describe a work task, a hobby, or another activity that you regularly do, and sequentially list the various actionsyou take in orderto complete this activity. Consider thecomplexity of your list and the amount ...

Please respond to the following discussion not an essay

Please respond to the following: {Discussion, NOT an Essay. Under 350 WORDS} a) Suggest one key factor that a financial manager should evaluate when determining whether to invest in stocks or bonds. Provide support for y ...

Exercise benefits us in so many ways including improving

Exercise benefits us in so many ways, including: improving our physical and mental health; reducing our risk of cardiovascular disease; increasing our energy, stamina, strength, and agility; promoting better sleep; impro ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As