Business, 23.04.2021 19:20 Angela1998

Suppose you are a network systems provider and are bidding for the job of providing and installing a systemfor a new government office building. You are considering submitting one of three bids: a low bid of $500,000, a medium bid of $600,000, and a high bid of $700,000. The cost of the job to you will be $450,000, regardless of your bid. Thus, if you submit a bid of $500,000 and win the contract, your profit will be $500,000 -$450,000 = $50,000. If you do not win the contract, your payoff will be zero. Two competitors will also submit bids. Each competitor will bid $500,000, $600,000, or $700,000 with probability 1/3 each, with your competitors' bids being independent of each other. The contract will be awarded to the lowest bidder. In the case of a tie, the contract will be awarded to the bidder with the most experience. In this case, you will certainly win because your company has more experience than the other two. The bids are sealed and made simultaneously.

Required:
a. If you bid medium ($600,000), what is your probability of winning the contract?
b. Draw a decision tree to determine which bid (low, medium, high) yields the highest expected profit for you.
c. Suppose a clairvoyant could tell you in advance exactly what both competitors’ bids will be. What is the expected value of this perfect information?
d. Suppose instead that the clairvoyant could tell you in advance exactly what competitor #1's bid will be, but you would remain uncertain about competitor #2's bid. What is the expected value of this information?

Answers: 3

Show answers

Another question on Business

Business, 21.06.2019 21:30

Price and efficiency variances, journal entries. the schuyler corporation manufactures lamps. it has set up the following standards per finished unit for direct materials and direct manufacturing labor: direct materials: 10 lb. at $4.50 per lb. $45.00 direct manufacturing labor: 0.5 hour at $30 per hour 15.00 the number of finished units budgeted for january 2017 was 10,000; 9,850 units were actually produced. actual results in january 2017 were as follows: direct materials: 98,055 lb. used direct manufacturing labor: 4,900 hours $154,350 assume that there was no beginning inventory of either direct materials or finished units. during the month, materials purchased amounted to 100,000 lb., at a total cost of $465,000. input price variances are isolated upon purchase. input-efficiency variances are isolated at the time of usage. 1. compute the january 2017 price and efficiency variances of direct materials and direct manufacturing labor. 2. prepare journal entries to record the variances in requirement 1. 3. comment on the january 2017 price and efficiency variances of schuyler corporation. 4. why might schuyler calculate direct materials price variances and direct materials efficiency variances with reference to different points in time

Answers: 2

Answer

Business, 22.06.2019 01:10

Suppose someone wants to sell a piece of land for cash. the selling of a piece of land represents turning econ

Answers: 3

Answer

Business, 22.06.2019 01:30

Eliminating entries (including goodwill impairment) and worksheets for various years on january 1, 2013, porter company purchased an 80% interest in the capital stock of salem company for$850,000. at that time, salem company had capital stock of $550,000 and retained earnings of $80,000.differences between the fair value and the book value of the identifiable assets of salem company were asfollows: fair value in excess of book valueequipment$130,000land65,000inventory40,000the book values of all other assets and liabilities of salem company were equal to their fair values onjanuary 1, 2013. the equipment had a remaining life of five years on january 1, 2013. the inventory was sold in2013.salem companyâ€™s net income and dividends declared in 2013 and 2014 were as follows: year 2013 net income of $100,000; dividends declared of $25,000year 2014 net income of $110,000; dividends declared of $35,000required: a.prepare a computation and allocation schedule for the difference between book value of equity acquired andthe value implied by the purchase price.b.present the eliminating/adjusting entries needed on the consolidated worksheet for the year endeddecember 31, 2013. (it is not necessary to prepare the worksheet.)lo6lo1

Answers: 1

Answer

Business, 22.06.2019 03:00

Afirm's before-tax cost of debt, rd, is the interest rate that the firm must pay on debt. because interest is tax deductible, the relevant cost of debt used to calculate a firm's wacc is the cost of debt, rd (1 â€“ t). the cost of debt is used in calculating the wacc because we are interested in maximizing the value of the firm's stock, and the stock price depends on cash flows. it is important to emphasize that the cost of debt is the interest rate on debt, not debt because our primary concern with the cost of capital is its use in capital budgeting decisions. the rate at which the firm has borrowed in the past is because we need to know the cost of capital. for these reasons, the on outstanding debt (which reflects current market conditions) is a better measure of the cost of debt than the . the on the company's -term debt is generally used to calculate the cost of debt because more often than not, the capital is being raised to fund -term projects. quantitative problem: 5 years ago, barton industries issued 25-year noncallable, semiannual bonds with a $1,600 face value and a 8% coupon, semiannual payment ($64 payment every 6 months). the bonds currently sell for $845.87. if the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? round your answer to 2 decimal places. do not round intermediate calcu

Answers: 3

Answer

You know the right answer?

Suppose you are a network systems provider and are bidding for the job of providing and installing a...

Questions