Premium Essay

Long Term Investment Decision by a Firm

In: Business and Management

Submitted By SAKSHIPARI
Words 1984
Pages 8
LONG TERM INVESTMENT DECISION BY A COMPANY

The producers of low calorie microwavable food have been expecting a change in price and they want to choose the price strategy which would make their product less elastic and responsive to changes in the prices, then the company should make careful analysis of the entire market situation. The company should look for the substitute goods in the market and their pricing strategy. Higher the number of substitutes are available, higher will be the chance of rise in elasticity of our low calorie microwavable food. The buyers should not have many options to buy from the market. However, if there are only few substitutes available, then the producers may keep the price high in the market of their product. It is also determined by the market power of the producer. Market power is determined by the elasticity of demand of the product. The firm can set higher mark-up over their marginal cost if they know that customers will not shift to another product in case of price increase. Hence, the firm or the producer should consider the cross price elasticity of demand of their product. Another factor to be considered while setting up prices of their product in the market is that of government policies in the economy. Fiscal policy would determine the taxes and other components of aggregate demand. If the firms have set higher taxes, then people would have less disposable income available with them and they would like to spend less on such less calorie microwavable food items because such items are not the necessity for their survival. The in that case, prices should be low in the market so that more people could buy our product and we would be able to earn good amount of total revenue. Moreover, higher sales tax would also reduce the demand of our product in the market. Another factor to be considered by producers to set the prices in…...

Similar Documents

Premium Essay

Long Term Investment

...Long-Term Financing Long- term financing strategies are used by financial managers to insure that funds invested today will increase in value or stay the same over a stated period of time. This document will compare and contrast the capital asset pricing model (CAPM) and discounted cash flow method (DCF). The debt and equity mix are intended to enable an organization to capitalize on investments. The debt and equity mix will be reviewed as will the characteristics of the financial market and debt and equity instruments. Long-term finance options will be analyzed. Valuation Models The Discounted Cash Flows Model (DCFM) and the Capital Asset Pricing Model (CAPM) are examples of estimation tools used to determine present securities values through the time value of money. DFCM uses simple discounting of projected cash flows over the life of the security, while CAPM uses a more complicated formula. Both methods apply to individual securities and help investors to decide investment risk choices; however, CAPM also "turns finding the efficient frontier into a doable task, because you only have to calculate the co-variances of every pair of classes, instead of every pair of everything" (Moneychimp, n.d.). The CAPM thereby gains the investor more information about a wider range of securities than the DCFM provides. DFCM uses either the internal rate of return (IRR) or the net present value (NPV) method to calculate present values of future cash flows. Both these methods use......

Words: 1810 - Pages: 8

Premium Essay

Capitalism for the Long Term

...84 Harvard Business Review March 2011 HBR.ORG Dominic Barton is the global managing director of McKinsey & Company. Long Term Business leaders face a choice: They can reform the system, or watch as the government exerts control. A call to action from McKinsey & Company’s global managing director by Dominic Barton Capitalism for the T ILLUSTRATION: JAMES JOYCE he near meltdown of the nancial system and the ensuing Great Recession have been, and will remain, the de ning issue for the current generation of executives. Now that the worst seems to be behind us, it’s tempting to feel deep relief—and a strong desire to return to the comfort of business as usual. But that is simply not an option. In the past three years we’ve already seen a dramatic acceleration in the shifting balance of power between the developed West and the emerging East, a rise in populist politics and social stresses in a number of countries, and significant strains on global governance systems. As the fallout from the crisis continues, we’re likely to see increased geopolitical rivalries, new international security challenges, and rising tensions from trade, migration, and resource competition. For business leaders, however, the most consequential outcome of the crisis is the challenge to capitalism itself. That challenge did not just arise in the wake of the Great Recession. Recall that trust in business hit historically low levels more than a decade ago. But the crisis and the surge......

Words: 4956 - Pages: 20

Premium Essay

Long-Term Investment Decisions

...Long-Term Investment Decisions Government Regulations Government regulation borders within the mandated needs in the economy to strike a balance between the market activities and social welfare of the people. The role of government in the market has been seen as one that is indispensable in an economy where this balance is needful. Contrary to this argument, it has also been observed that government involvement in the market economy can to a large extent lead to sub-optimal results. It is agreeable however, that government intervention guarantee the social welfare and production of public goods. These are aspects that are not possible to achieve through the market system (Smith, 2012). The main reasons for government regulation are to provide public goods such as security and public health and lighting. The production of certain necessary goods in the economy cannot be achieved through the market system owing to lack of a proper measure for payment. Some public necessary goods have a feature of non-excludability. It is impossible to provide these goods excluding those who have not paid from using them. The government regulation mechanism comes in to collectively provide the goods and create a payment mechanism that market cannot sustain (Eidenmüller, 2011). Redistribution of income in the economy is also a function achieved through government intervention. The national role of the government is to ensure welfare to all and, where there is an imbalance, the......

Words: 1279 - Pages: 6

Free Essay

Assignment 2: Operations and Long –Term Investment Decision

...Assignment 2: Operations and Long –Term Investment Decision Joanne T. Johnson Eco 550 March 20, 2014 Professor Jae – Kwang Hwang Operations and Long –Term Investment Decision Introduction The grocery market is filled with various options for microwavable food depending on the preferences of the consumers. Instead of the traditional use of the oven many families now use the microwave because of their busy lifestyles. The variety of healthy low calorie -microwave food has made shopping much easier for today’s busy consumer. Low calorie labels are regulated by the Food and Drug Administration (FDA) and require food “labels claiming low-calories must not have more than 40 calories for a given reference amount (except sugar substitutes)”. (The Calorie Control Council, 2014) Healthy low-calorie microwave foods have come a long way since the first Swanson pre-packaged TV dinner in the 1950’s. The meal tray was heated in the oven and consisted of a small portion of meat, two vegetables and dessert. The top two competing manufacturers of microwavable low-calorie foods are Lean Cuisine owned by Nestle and Healthy Choice owned by ConAgra. Both leaders in the frozen food market began in the 80’s. Healthy Choice works rigorously with the FDA to assure foods qualify under government health standards for healthy low calorie foods. Like all businesses these two businesses need a financial business plan that allows them to assess the company’s results and set targets for......

Words: 1770 - Pages: 8

Free Essay

2011 Long Term Investment Case

...A long term value opportunity BAT Bangladesh overview (Ticker: BATBC BD BDT) BAT Bangladesh (“BATBC”), which is a 65.9% owned subsidiary of British American Tobacco and has a market cap of $431m, is the leading tobacco company in Bangladesh, with 50% market share, dominating the premium and medium price segments of the tobacco market (where it holds 75% market share). The brand portfolio of BAT Bangladesh includes Benson & Hedges, John Player Gold Leaf, Pall Mall, Capstan, Star, Scissors, Bristol, Pilot and Hollywood. BATBC engages in the production and distribution of cigarettes (89% of sales) and in tobacco leaf export (11% of sales). Interestingly Bangladesh is among the 20 largest global producers of tobacco with c. $1.8bn of production in 2011. BATBC plays a key role in the economy since it is the largest private sector tax payer of the country, collecting ~$650m for the government in 2011 (including supplementary duty, value added tax and other taxes). This represents 2/3 of total tax collections from cigarettes industry in Bangladesh). In 2011 BATBC achieved $329m of net sales and $36m of net income. The company has no debt and holds $10m of cash. BATBC employs ~1,200 people directly and about 50,000 people indirectly as farmers, distributors and local suppliers. BATBC production capacity has recently been increased to 30bn sticks. Tobacco Market in Bangladesh According to the Global Adult Tobacco Survey: Bangladesh 2009, 23.0% of adult aged 15 years or......

Words: 1963 - Pages: 8

Premium Essay

Investment Decision

...CAPITAL BUDGETING DECISIONS 12/24/2012 Prof.Dr. Anuj Verma 2 LEARNING OBJECTIVES Understand the nature and importance of investment decisions Explain the methods of calculating net present value (NPV) and internal rate of return (IRR) Show the implications of net present value (NPV) and internal rate of return (IRR) Describe the non-DCF evaluation criteria: payback and accounting rate of return Illustrate the computation of the discounted payback Compare and contrast NPV and IRR and emphasize the superiority of NPV rule 12/24/2012 Prof.Dr. Anuj Verma 3 Nature of Investment Decisions The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm’s investment decisions would generally include expansion, acquisition, modernisation and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision. Decisions like the change in the methods of sales distribution, or an advertisement campaign or a research and development programme have long-term implications for the firm’s expenditures and benefits, and therefore, they should also be evaluated as investment decisions. 12/24/2012 Prof.Dr. Anuj Verma 4 Features of Investment Decisions The exchange of current funds for future benefits. The funds are invested in long-term assets. The future benefits will occur to the firm over a series of years. 12/24/2012 Prof.Dr. Anuj......

Words: 1004 - Pages: 5

Premium Essay

New Tax Incentive for Long-Term Equity Investments

...NEW TAX INCENTIVE FOR LONG-TERM EQUITY INVESTMENTS There has been a great deal of public discussion about the increased individual and corporate income tax rates and general harsh treatment of upper income taxpayers under the Omnibus Budget Reconciliation Act of 1993. However. there has been scant attention to what may, in fact, prove to be a silver lining in that tax cloud - the newly authorized capital gains exclusion for the stock of certain companies. Under the Act. non-corporate holders of stock in "qualified small businesses" can escape tax on up to one-half of any gain from the sale of that stock which they have held for at least five years. 1. Qualified Small Businesses The new tax benefit is only available if the issuing corporation ("Issuer") is a qualified small business on the date of the stock issuance and during "substantially" all of the period that an investor holds its stock. In order to qualify as a small business. an Issuer must satisfy the following requirements: A. Non-Qualifying Corporations: The corporation cannot be an S corporation; a domestic international sales corporation that has made an IRC section 936 election: a regulated investment company: a real estate investment trust. a real estate mortgage investment conduit or a cooperative. B. Conduct of Active Business: It must use at least 80% (by value) of its assets (including intangible assets) in the actual conduct of a "qualified trade or......

Words: 1137 - Pages: 5

Premium Essay

Assignment 3 - Long Term Investment Decisions

...Assignment 3: Long-Term Investment Decisions-Low Calorie Microwavable Food Company Name: Professor: Course title: Institution: Date: Outline of plan for pricing strategies to reduce products price elasticity Low calorie Microwavable Food Company should consider the following pricing strategies to reduce price elasticity to achieve maximum profits. 1. Branding: This strategy involves creating a unique product identity, which customers can easily relate with and attach high quality. Branding is the process of creating an image or idea of a product or service in the market arena, which increases the demand for such product. It may include changing the packaging, creating brand names and improving the quality of a product. Once a brand is build, a firm succeeds in creating a major difference in the minds of customers between their product and those of competitors. Once a product attains a positive outlook in the mindset of consumers, the organization attains brand equity, which brings competitive advantage for the firm as customers view the products as unique or superior, which effectively reduces the pricing elasticity as substitute products become less close to their product. 2. Product differentiation: In this pricing strategy, the firm should seek to identify and highlight the differences between its products and those of competitors. This allows the firm to make their product unique and more attractive to customers,......

Words: 1639 - Pages: 7

Premium Essay

Long Term Investment Decisions

...Now, with the purpose to maintain their products as inelastic as feasible, the firm will attempt to differentiate its merchandise from other products of other firms. If their product is dissimilar from others then the customers will not locate a substitute for that merchandise straightforwardly. That will formulate the demand for the equivalent product inelastic in character. We all are familiar with the fact that the larger the amount of product differentiation, the larger the market power becomes consequently, it is sensible for the organization to carry out vigorous product differentiation to make the most of its profits. Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company. The major effects of government policies have on production and employment results in intervention and influence which decreases the production that will build jobs for the growing economy. Government policies restrict growth and can intervene and influence the production process. One example is a company’s new product. Suppose a product is advantageous for the general public. Then the government will promote the manufacturing of the product. It follows that, the administration may offer subsidy. This will augment the production of the goods and will also produce new employment opportunity in such firm. But presume that such merchandise is injurious for the general public. ......

Words: 1998 - Pages: 8

Premium Essay

Long-Term Investment Decisions

...Long-term Investment Decisions Introduction Investment is the process of creating or purchasing possessions with the aim of gaining benefits in future. Therefore, making long-term objectives or decisions is necessary for any business that relates to investment. For the organization to yield returns and gain good performance in the market it must make good use of the financial resources available to acquire buildings, machines, or other assets that will enable smooth operation within the organization for a long period. A planning that the management needs to consider involves accessing many issues that face the business, and finally decide which issue to invest on depending on its urgency in the business. The issues that are encountered in the business vary depending on attitude, circumstances to risk, and particular age. Therefore, the management must take time to think about the issues before making decisions to avoid possibly costly mistakes. A Plan Used By Managers When Selecting Pricing Strategies In Order To Attain Inelastic In Their Products. It’s very crucial for managers to price their product in order to attain the potential or current customers in the market. As a result, the decision made by the management will determine the future progress or success of the business. For that reason, major strategies like employing pricing, safeguarding inelasticity in products, and many other strategies need to be established to ensure that products are retained by......

Words: 1918 - Pages: 8

Free Essay

Long Firm

...Jake Arnott’s The Long Firm includes may discussion about crime and punishment, law and order and justice and in justice. Do you regard novels as useful sources of legal theory or merely irrelevant distraction? It has been argued by recent legal theorists that novels are useful sources of legal theory. In Ian Ward’s book Law and literature: possibilities and perspectives , he argues that by studying literature, students are able to better understand law. He suggests, for example, that it is worth in the examination of ‘... the psychology of English property law ... [to look]... at the pictures in the Tale of Peter Rabbit Arguably, novels which have law as a central theme are a mirror by which lawyers or legal researchers can examine contemporary attitudes to the law and professionals working within it. Current participants in the debate as to the usefulness of literature and law have examined works such as Kafka’s The Trial or Dickens novels as sources of legal theory for these same reasons. Professor R.M. Dworkin argued that law is similar to literature in that we seek to find meaning in the same by process of interpretation. He argued that this process is adopted by judges in that they interpret the law. He attacked legal positivists, who simply examine the law in isolation from society, who find only the meaning of the law and not its substance. The debate as to the usefulness of novels sees the creation of the distinction between ‘law in literature’ and ‘law......

Words: 2363 - Pages: 10

Premium Essay

Long -Term Investment Decisions

...Running head: LONG-TERM INVESTMENT DECISIONS 1 Long-Term Investment Decisions Juanita Bates Professor: Mohammad Sumadi ECO 550 Managerial Economics and Globalization December 5, 2015 Long-Term Investment Decisions 2 Abstract Microwave food have taken place of the traditional family-styled dining in today’s fast-paced society. There are a variety of microwavable food for consumers to choice from. With today’s health conscious society, the microwave food industry have adapted to meet the preferences of the consumers by producing low calorie frozen microwavable foods. With the growth of this market, it is important that companies in this market have a good marketing plan along with a good strategic business plan. An important long-term decision a business can make is whether or not to invest. The process of evaluating the sustainability of long-term investments with a view of distributing financial resources to investments that are profitable is known as capital budgeting. Capital budgeting focuses on investment costs related to the benefits generated during their economic life. This is one of the most important decisions for a company because it helps with the appraisal and selection of investments that are most feasible. It also helps with the decision of accepting or rejecting investment proposals.......

Words: 1792 - Pages: 8

Premium Essay

What Macro Information Leads to Long-Term Investment Strategy?

...MFIN7014 Fund Management and Alternative Investments Section 2A, 2015 Discussion paper I What macro information leads to long-term investment strategy? Shuqin Zhao Stu.ID: 3035236775 Canada Pension Plan Investment Board (CPPIB) as a professional investment management organization, it focuses on long investment horizon which gives it advantages on risk control and long-term opportunities over competitors. Longterm investment requires asset managers to be more sensitive to future economy trend. Ted Lee pointed out that for long-term view, US market continues to shrink, while the future three group countries will be China, India and Brazil, due to their low correlation with international capital which benefits the portfolio. While India and Brazil are respectively going through political change and recession, opportunities could be largely obsessed in the future, as seen by professionals. In 2015, most of money actually came from Asia, but this is not the only macroeconomy signals that lead to such certainty about future market segments. Based on conversation with Ted, I conclude another strong macro-economy signal as business development. On September 19th 2014, Alibaba IPO ranked as biggest IPO in the world after additional shares sold, which surpassed a previous global record set by Agricultural Bank of China Ltd in 2010. Looking through past five years, largest IPOs includes a lot of Chinese company, which indicates strong signal of......

Words: 670 - Pages: 3

Premium Essay

Long Term Pool Investment Neh

...meeting conducted by the Investment Committee of New England Health Care, in January 2003, focused on the target asset allocations of its three long-term investment funds. Which include the Long-Term Pool of endowment-like funds, the assets of a final-salary pension plan, and the assets of a cash balance pension plan. The Investment Committee is responsible for tasks related to funds performance evaluations, formulating each funds target, benchmarks (corporate discount rates), and “… tactical asset allocation portfolios; and selecting and monitoring the various external investment firms that manage a large fraction of each fund’s assets” (Light, 2005, p.296). Within 2003, “… an Executive Committee of the Investment Committee met monthly to monitor tactical allocations and changing market valuations” (Light, 2005, p.298). According to Investopedia (2008), “This strategy allows portfolio managers to create extra value by taking advantage of certain situations in the marketplace. It is a moderately active strategy since managers return to the portfolio's original strategic asset mix when desired short-term profits are achieved” (p.1). Finding the proper balance in terms of asset allocation planning is an important decision. “All the funds, except for the Long-Term Pool, were fixed income funds. The Long-Term Pool was a diversified capital appreciation fund that invested in equities, private equity, alternative assets, and certain fixed income investments” (Light, 2005,......

Words: 494 - Pages: 2

Premium Essay

Long-Term Investment

...DreamWorks Animation Amanda Rice Dr. Stevens FIN 534 December 11, 2011 Investing into DreamWorks Animation would be worth the wait, but it could be a long-term investment. DreamWorks is an animation company that was produced October 12, 1994, by David Geffin, Jeffrey Katzenberg, and Steven Spielberg. Building an empire was very important for the company because each founder had the skill and brainpower to produce great movies. Steven Spielberg is one of the masterminds behind DreamWorks Animation. He has produced many films including the blockbuster hits Jaws and Jurassic Park. David Geffen is also another mastermind as well because he has helped remake DreamGirls the movie was hit for the company. In 2008, Geffen left to company to pursue other ventures. Jeffrey Katzenberg was also the mastermind behind DreamWorks Animation and produced the movie Shrek in 2001. “DreamWorks Animation creates family entertainment, including animated feature films, television specials and series, live entertainment properties, an online virtual world and related consumer products, meant for audiences around the world,”(www.nytimes.com). The company is moving in the right direction by producing good movies for any audience to watch with their family. “The Company has theatrically released a total of 23 animated feature films, including the franchise properties of Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon,” (www.dreamworksanimation.com). Producing these......

Words: 2518 - Pages: 11