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Lawrence Sports Simulation

In: Business and Management

Submitted By vargasjohn
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Introduction Guillermo Furniture Store is a furniture manufacturer in Sonora, Mexico who faces competition who are putting a dent in his business with more modern equipment lowering production costs hurting his profit margins and lowering prices. The principles of finance describe typical behavior in financial transactions and provide guidance for decision making.
Financial Self Interest guides rational decision making Guillermo has to make decisions based on the fact money is not everything. There is a balance of work and life. He has chosen not to acquire any companies since it would take time away from his family.
Many financial decisions must consider the time value of money
The furniture store has to consider that a dollar today is worth more than a dollar tomorrow. The time value of money derives from the opportunity to earn interest on it. Simply stated, the time value of money is how much it costs to “rent” money. Emery Finnerty Stowe
All Transactions have at least two sides, with each party considering their self interest Most transactions are Zero-Sum where one party gains only at the other party’s expense. In this case Guillermo must negotiate the terms and conditions that are favorable to the growth of his furniture business if he goes into partnerships with competitors or foreign distributors.
Incremental costs and benefits are the basis for choices among alternatives. Guillermo must weigh the cons and pros of staying current, going high tech or becoming a broker. In an excel spreadsheet that was provided, going high tech proved to be the highest profit margin of 195,564 Net Income before taxes.

Investors are risk averse and therefore face a risk return trade off The greater the risk, the higher the return. If Guillermo chooses to invest in the expensive high tech equipment such as robots and laser cutters for precise wood cuts, he...

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