Purchase Solution

Pricing Decisions and Wealth of Firm

Not what you're looking for?

Ask Custom Question

Many believe that any selling price above the contribution margin will add to the wealth of the firm. This being the case, is there a danger in the decision rule that states "always accept any offer that has a positive contribution margin?"

Purchase this Solution
Solution Summary

The solution discusses a decision rule for selling prices and the contribution margin of the firm.

Solution Preview

"always accept any offer that has a positive contribution margin?" - This works only when we have excess ...

Purchase this Solution
Free BrainMass Quizzes
Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

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.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

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.

View More Free Quizzes
Related BrainMass Solutions

  • The Value of an Efficient Market

    Managers will be motivated to take the decisions that maximize the share price and hence the shareholder wealth only when they know that their wealth maximizing decisions are accurately signaled to the market and gets incorporated in the share price.

  • Relevant Costing

    If it doesn't, then the wealth of the firm may go down where the contribution margin does not cover the incremental fixed costs needed to serve the new order.

  • maximizing shareholder wealth and payment of bribes

    Good decisions would mean not only feasible decisions but most of all, ethical decisions.

  • Corporate Finance Concepts

    The main principle of finance is maximizing shareholder wealth. Shareholders are the owners of the corporation, and their primary goal is to gain wealth from investing in the firm.

  • Transfer pricing and what encourages managers in decisions

    An overall look at transfer pricing from a manager's point of view. Discussing the effects managers feel when trying to make decisions and who benefits most from those decisions.

  • CAPM

    Suppose you invested 90 percent of your wealth in the market portfolio and the remainder of your wealth in the shares in the law firm. What would be the beta of your portfolio? CAPM.

  • Financial Management Goals

    The description should include how earnings are valued, how shareholder wealth can be maximized, and how management decisions affect stockholder wealth. The earnings are valued between the stockholders and management.

  • Dividend Policy

    For example, one study found that the wealth of the shareholders is greatly influenced mainly by five variables: Growth in sales, Improvement of Profit Margin, Capital Investment Decisions (both working capital and fixed capital), Capital Structure Decisions

  • Pricing and output decisions - Monopoly and Perfect competition

    The firm will encounter no fixed costs, and all revenue is after taxes. As your firm has been granted an exclusive contract, your pricing and output decisions will be those of a monopolist.

View More Related Solutions