The condition for the long run equilibrium of a perfectly competitive firm
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Price=MC=AC
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Price=TC
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MC=AVC
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Bill2021-10-13 01:06:302021-10-13 01:06:30equilibriumAfter market close yesterday, Cisco announced their quarterly results. As a result of the news, the expected price of a share of Cisco stock in one year from now changed. The table below gives the last price the stock traded for before the market closed yesterday, the new expected price after the results were announced, and the CAPM beta for the stock.
Stock
Closing Price
P0
New Expected Price in 1 Year
E(P1) CAPM Beta
Cisco $45 $50 1.2 Markets have not yet opened today. The risk-free rate is 2% and the expected return of the market portfolio is 7%. Assume Cisco does not pay dividends. Assume that the CAPM holds, and that the expected return on the market and the stock’s beta do not change.
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Bill2021-10-13 00:51:572021-10-13 00:51:57CAPMScenario
You manage the international business for a manufacturing company. You are responsible for the overall profitability of your business unit. Your company ships your products to Malaysia. The retail stores that buy your products there pay you in their local currency, the Malaysian ringgit (MYR). All sales for the first quarter are paid on April 1st and use the exchange rate at the close of business on April 1st or the first business day after April 1st if it falls on a Saturday or Sunday. The company has sales contracts with different vendors that determine the number of units sold well in advance. The company is contractually obligated to sell 4,000 units for exactly 1.25 million MYR for the first quarter. The break-even point for each unit is $90 in U.S. dollars. Use the following foreign exchange rates:
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On January 1, the daily spot rate is 3.13 MYR, and the forward rate is 0.317 U.S. dollars/MYR for April 1st of the same year.
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On April 1, the daily spot rate is 3.52 MYR.
Prompt
Using the information above, create a short business memo that explains the profitability, viability, and importance of considering foreign exchange on the basis of the scenarios below.
Scenario 1: The company uses the spot rate on April 1st to convert its sales revenue in MYR to U.S. dollars.
Scenario 2: On January 1st, the company uses that day’s forward rate today to lock in a foreign exchange rate for its expected 1.25 million MYR in sales. This means the company agreed to exchange 1.25 million MYR using the forward rate on January 1st when April 1 arrives.
Scenario 3: Another option for the company is to spend the foreign currency and avoid any currency exchange. Because it is a manufacturing company, raw materials are always needed.
Specifically, you must address the following rubric criteria:
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Foreign Exchange Calculations: Determine the profitability of the international business by using foreign exchange calculations for the first and second scenarios.
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Spend or Save: Discuss what you would need to consider when determining if the company should buy raw materials with the foreign currency in an effort to avoid foreign exchange risk and whether this is a viable option for the company.
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Bill2021-10-13 00:25:412021-10-13 00:25:41ScenarioImagine an organization with more than 10,000 employees working in 30 countries around the world—with no hierarchy structure. W. L. Gore & Associates, headquartered in Newark, Delaware, is a model of unusual business practices. Wilbert Gore, who left Dupont to explore new uses for Teflon, started the company in 1958. Best known for its breathable, weatherproof Gore-Tex fabric, Glide dental floss, and Elixir guitar strings, the company has no bosses, no titles, no departments, and no formal job descriptions. There is a managerial hierarchy at Gore, and top management treats employees, called associates, as peers.
In 2005, the company named 22-year associate Terri Kelly as its new chief executive officer. Unlike large public corporations, Gore’s announcement was made without much fanfare. Today, more than 12 years later, Kelly continues as chief executive but is the first to admit that it’s not about the CEO at Gore—it’s about the people who work there and their relationships with one another.
The company focuses on its products and company values rather than on individuals. Committees, comprised of employees, make major decisions such as hiring, firing, and compensation. They even set top executives’ compensation. Employees work on teams, which are switched around every few years. In fact, all employees are expected to make minor decisions instead of relying on the “boss” to make them. “We’re committed to how we get things done,” Kelly says. “That puts a tremendous burden on leaders because it’s easier to say ‘Just do it’ than to explain the rationale. But in the long run, you’ll get much better results because people are making a commitment.”
Because no formal lines of authority exist, employees can speak to anyone in the company at any time. This arrangement also forces employees to spend considerable time developing relationships. As one employee described it, instead of trying to please just one “boss,” you have to please everyone. Several years ago the company underwent a “strategy refresh,” conducting surveys and discussions with employees about how they fit into the organization’s culture. Not surprisingly, there was a cultural divide based on multiple generations of workers and length of service stature, which Kelly and her associates have worked hard to overcome. She realizes that not everyone will become a “lifer” at Gore, but recognizes the importance of younger employees who have helped the company become more tech-savvy in communications and stay well-connected in a fast-moving business world.
The informal organizational structure continues to work well. With revenues of $3 billion, the company produces thousands of advanced technology products for the electronics, industrial, fabrics, and medical markets. Its corporate structure fosters innovation and has been a significant contributor to associate satisfaction. Employee turnover is a low 3 percent a year, and the company can choose new associates from the thousands of job applications it receives annually. In 2017, Gore was named one of the 12 legends on Fortune’s “100 Best Companies to Work For.” These companies have made Fortune’s list for all 20 years the magazine has published its annual “Best” rankings.
Critical Thinking Questions
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Given the lack of formal structure, how important do you think Gore’s informal structure becomes?
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Is L. Gore a mechanistic or an organic organization? Support your answer with examples from the case.
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Bill2021-10-13 00:16:072021-10-13 00:16:07organization______________= R2-R1/Q2-Q1
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Average revenue
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Total revenue
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Marginal revenue
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Bill2021-10-12 23:40:512021-10-12 23:40:51revenueSo long as Average Revenue is falling, Marginal Revenue will be ______________ Average Revenue
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Less than
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More than
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Equal to
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Bill2021-10-12 23:33:122021-10-12 23:33:12Marginal RevenuePrices of Bata shoe as Rs.99.99, this pricing is
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Mark up pricing
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Odd pricing
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Marginal cost pricing
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Bill2021-10-12 23:28:212021-10-12 23:28:21pricingDemand for tyres depends on demand of vehicles, the demand for tyres called as
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Composite demand
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Derivative demand
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Joint demand
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Bill2021-10-12 23:12:302021-10-12 23:12:30Demand for tyresUnder oligopoly a single seller cannot influence significantly
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market price
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quantity supplied
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advertisement cost
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Bill2021-10-12 23:05:542021-10-12 23:05:54oligopolyUnder ______________ Method, a panel is selected to give suggestions to solve the problems in hand
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Opinion survey
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Expert opinion
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Delphi method
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Bill2021-10-12 22:58:552021-10-12 22:58:55solve the problems in hand