Purchase Solution

Pricing Decision and Investment Evaluations

Not what you're looking for?

Ask Custom Question

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 decision.

"It is impossible to use DCF (Discounted cash flow) 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. How can they justify investing in a major research project based on its expected net present value? Explain how this can be done please, and if you were that manager would you have your resume ready to go out?

Purchase this Solution

Solution Summary

The solution explains pricing decisions and how discounted cash flows can be used for R&D in 441 words.

Solution Preview

The influence of law on prices can be seen in the following ways -

a. Anti-trust Laws - These check the price that can be charged by the company. If any unfair pricing is indicated then action can be taken against the firm.

b. Regulatory pricing - Many times the government sets the price that can be charged as was the case with electricity regulation.

c. Anti-dumping laws - These laws state that the price cannot be below cost

d. A law which prohibits discrimination in prices between different purchasers ( Robinson-Pitman Act)

The DCF methodology can be applied to R&D activities in 2 ways.

First method applicable to historical costs - the historical costs of R&D can be measured against ...

Purchase this Solution


Free BrainMass Quizzes
Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.