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Investment Decisions

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Pet Store - Part 1
A local pet store which has concentrated on selling puppies, is considering adding a line of pet food. A contractor estimates that is will cost $10,000 to convert some storage space into a retail area for the food. The store will purchase the specialty food for $15 and sell it for $30. Marketing research indicates that the store will sell 900 bags. Should the store add the pet food to its products and why?

Pet Store - Part 2
Assume that the store decided to add the pet food line. Two months after it began selling the food, its pet food sales declined dramatically because a competitor across the street started selling the identical food for $22 per bag. Should the store match the price offered by the competitor? Why?

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Solution Preview

Part 1
We calculate the total contribution margin from the sale of bags and compare to the cost. The contribution margin is (30-15) = $15 per unit. Number of bags sold are 900. Total contribution ...

Solution Summary

The solution explains how to determine if a new line of pet food should be added and the pricing.

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Direct Foreign Investment Decision Proposal and Presentation

Prepare a 2000-word proposal in which you select the optimal financing and investment strategy for your scenario. Include a PowerPoint file summarizing your proposal with at least 5 slides.
Include the following information in your proposal:

o Identify which country you chose and why. Use India and Brazil

o Identify foreign exchange rate data.

o Use foreign exchange and cost of capital data to determine appropriate capital sources.

o Conduct a sensitivity analysis, based on the following questions:

What if funds are blocked? How does this affect the parent organization?

What if the subsidiary provided funds?

How does the source of capital affect the subsidiary and parent organization?

What sources of capital would minimize the cost of capital to the subsidiary?

What happens if the country you chose provides incentives to invest? Now that your organization is profitable, the country is taking incentives back. How do you determine the residual value at the end of the project life?

How is the value of an organization determined from the following perspectives?

o Expiration of project life
o Friendly or unfriendly buyout
o Economic decision to change locations
o Nationalization or confiscation of organization

Format your paper according to APA standards.

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