9780321818171_berk_ch03

Consider the silver what is its cash value today

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: , we first need to quantify their values in equivalent terms—cash today. Consider the silver. What is its cash value today? Suppose silver can be bought and sold for a current market price of $25 per ounce. Then the 200 ounces of silver we give up has a cash value of1 (200 ounces of silver) ($25/ounce of silver) $5000 If the current market price for gold is $1300 per ounce, then for the 10 ounces of gold we receive a cash value of (10 ounces of gold) ($1300/ounce of gold) $13,000 We have now quantified the decision. The jeweller’s opportunity has a benefit of $13,000 and a cost of $5000. The net benefit of the decision is $13,000 $5000 $8000 today. The net value of the decision is positive, so by accepting the trade, the jewellery firm will be richer by $8000. E X AMPLE 3 .1 Problem Suppose you work as a customer account manager for an importer of frozen seafood. A customer is willing to purchase 300 kilograms of frozen shrimp today for a total price of $1500, including delivery. You can buy frozen shrimp on the wholesale market f...
View Full Document

This note was uploaded on 02/07/2014 for the course MIS 304 taught by Professor Mejias during the Spring '07 term at University of Arizona- Tucson.

Ask a homework question - tutors are online