NCC5010 Statistics Team Assignment 1 Team 8: Question 1: See Exhibit 1 Question 2: See Exhibit 1 for the folding back of the tree. The expected present value of potential cash flow is $13.98M, therefore, Merck should license the drug. Question 3: Assuming the probability of success in Phase 1 is P1. The expected payoff of the licensing the drug is 43.3*P1+(-30)*(1-P1). Merck will license the drug as long as the expected payoff is greater than the alternative option of not licensing the drug, i.e.
What lessons does Grolsch’s history suggest about how to compete in the markets targeted— particularly about modes of entry? 5. What other changes would you suggest to Grolsch's historical strategy? 6. Will the merger with SABMiller add value—or will it be a win-lose deal?
Explain the significance of the St Petersburg Paradox, the Common Ratio effect, and simultaneous gambling and insurance, and their implications for Expected Utility theory The analysis of choice under risk departs from the standard theory of consumer choice, because we have to introduce uncertainty to the model. Uncertainty arises because the consequence of at least one option is not known to the decision maker (Gravelle and Rees 2004), but the probabilities of all possible outcomes are known. Examples of uncertain outcomes are represented by gambling and insurance. An individual who buys insurance is accepting a certain loss of a small sum, the insurance premium, in preference to a combination of a small chance of a much larger loss and a large chance of no loss. He is choosing certainty over uncertainty, and is risk averse.
EC100 REINHARDT CAPITAL BUDGETING: How a business firm decides whether or not to acquire durable real assets In this write-up, I shall explain as simply as is possible (1) how modern business firms decide whether or not to purchase with the firm’s investible funds long-lived assets (land, machines, buildings) that will be used by the firm for more than one period and (2) how they finance these purchases. We shall explore the second question first and then illustrate the first with a numerical example. In the end, we shall explore cool, trick question with which you can annoy people in high finance—your own parents possibly among them. A. WHENCE DOES THE FIRM GET ITS FUNDS, AND WHAT IS THE COST TO THE FIRM PER DOLLAR AND PER YEAR OF SUCH
Caledonia Products Integrative Problem Shaneal Gaither, Nicolle Istre, Tara Shulfer, Laura Curry FIN/370 October 8, 2012 Instructor: Chrissy Helbling 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? Caledonia should focus on free cash flow rather than accounting profits. The reason being is because with free cash flow that money coming in can be immediately reinvested into different projects or areas of the firm to start earning higher revenue. By focusing on the incremental cash flows Caledonia can analyze and determine the benefits and the costs to any project.
Since the Walton Work Wear line is in the production stage, its accumulated development costs should be capitalized. The Carroway Cool Top has not started it commercial production which would allow the development costs not to be amortized yet. Also interest costs on loans to generate financing for the R&D activates of a product can be capitalized rather than expensed. The capitalization of interest would allow CCL to reduce taxable income in the future when it is more profitable. I would recommend that CCL make the above changes immediately so that the financail statements are not incorrect.
Q: What are the risks associated with arbitration? A: The risk of arbitration exists objectively, because it is irregular behavior of arbitration, so the risks of arbitration lead to the arbitration process and eventually leads to the unfair business and interests. Also if parties do not offer evidence, they may have an unfair result. Q: Why might a company prefer to settle disputes by litigation? A: Litigation is the final step to resolve a dispute.
Big advantages need to be broke down for their financial value and smaller advantages might seem to be more difficult to measure at first, but they will ultimately give the business more financial opportunity in the future. If the assets surpass their cost of accomplishment, the assets should be broke down using capital budgeting and figure out if they will see a good sizable profit compared to the capital that the company must invest in. A company needs to arrive with information systems plans that satisfy the business plan and approach, and correspond with their existing information technologies. Using scoring models and portfolios breakdown can both be used to help evaluate information systems
Metapath´s board believes the company has a great potential as an independent public company, and wonders if a Metapath and CallTech merger makes sense. Case problems and questions: Metapath must analyze how the offer from RSC, with the Participating convertible preferred stock would integrate with the existing preferred stocks already granted to existing shareholders in previous financing rounds. Usually the earlier investors preferred stocks becomes junior to the new VCs preferred, because the new VC won’t take the word of the old VCs that the company is well. The new VC would rather make sure his money is “secured” by having a senior claim through preferred stock. They would need to do a valuation of the participating feature of the Series E preferred stocks in the offer from RSC.