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    Pricing Decisions and DCF Methods for Investments

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    Managers should base pricing decisions on both cost and market factors.

    1. Managers should base pricing decisions on both cost and market factors. In addition, they must also consider legal issues. Describe the influence that the law has on pricing decisions.

    2. "It is impossible to use DCF methods for evaluating investments in research and development. There are no cost savings to measure, and we don't even know what products might come out of our R&D activities." This is a quote from an R&D manager who was asked to justify investment in a major research project based on its expected net present value. How would you respond to this statement? Do you agree or disagree? Explain.

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    Solution Preview

    Pricing can be difficult in markets with special needs. Down economies, times of disasters, new construction in new places, and new markets offer a challenge for marketing professionals. Legal issues arise when pricing seems to take advantage of either competitors or the public. Among the areas are dumping, gouging, and fixing prices.

    When a company or country decides to make money and eliminate supply by making it available to the public in great quantities for very low pricing, this can be known as dumping. In the current market, it is difficult, but countries such as China are often accused of ...

    Solution Summary

    This solution describes the influence that the law has on pricing decisions, and provides a response to a statement regarding DCF methods for investments.

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