(2)a.How many pounds of each fertilizer are produced in the profit maximizingplan?_________ Alpha Grow_________ Better Grow (3)b.In order to be competitive with another firm which sells fertilizer that is comparable to Better Grow, you are considering reducing the price you charge by $1.00. This will reduce your profit margin for Better Grow to $2.00 per pound. Will this price change affect your recommendation on the profit maximizing mix of fertilizer produced by your client? Identify the information you used to answer this question. (3)c.What level of weekly profit could be achieved if propane storage capacity were reduced to 1,500 pounds? Identify the information you used to answer this question. (3) d. The company could lease 100 units of increased packaging capacity for $120 per week. Would you recommend that they do so? Identify the information you used to answer this question. 3
5. You have taken a job with a major retailer that sells a private label brand of organic and conventional corn chips. All the chips are actually made with organic ingredients – the only difference is the packaging. Your first task on the new job was to estimate demand functions for each of these two products. Using weekly store level data that included weeks when each product was on sale, you have estimated models that imply a price elasticity of demand for organic corn chips of -1.50 and a price elasticity of demand for conventional corn chips of -1.80 . The marginal cost of producing and distributing a bag of corn chips (either organic or conventional) is $1.60 . Use optimal markup on marginal cost pricing to determine the price you should charge in each market. (Recall that the optimal percentage markup on marginal cost is given by the formula ( -1/(ε p + 1) ), where ε p is the price elasticity of demand and that the optimal markup pricing factor is given by the formula ( ε p /(ε p + 1) ). Show your calculations. (5) a. Price for organic corn chips (5) b. Price for conventional corn chips 6. Election results over the past weekend have raised concerns about the stability and repayment capacity of the Greek government and about the future prospects for the Greek economy. How would you expect an increase in political and economic instability to affect interest rates for commercial loans in such a country? What impact would this have on firm values? Explain your reasoning.
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- Spring '18
- Net Present Value, consultant, APEC, corn chips