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Unformatted text preview: nalysis
1. Honda Motor Company is considering offering a $2000 rebate on its minivan, lowering
the vehicle’s price from $30,000 to $28,000. The marketing group estimates that this
rebate will increase sales over the next year from 40,000 to 55,000 vehicles. Suppose
Honda’s profit margin with the rebate is $6000 per vehicle. If the change in sales is the
only consequence of this decision, what are its costs and benefits? Is it a good idea?
2. You are an international shrimp trader. A food producer in the Czech Republic offers
to pay you 2 million Czech koruna today in exchange for a year’s supply of frozen 03_ch03_berk.indd
03_ch03_berk.indd 85 12/15/11 8:08 PM 86 Part 2 Interest Rates and Valuing Cash Flows
shrimp. Your Thai supplier will provide you with the same supply for 3 million Thai
baht today. If the current competitive market exchange rates are 25.50 koruna per
dollar and 41.25 baht per dollar, what is the value of this deal?
3. Suppose your employer offers you a choice between a $500...
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- Spring '07