A. Reserve Prices
A reserve price is a minimum price set by the auctioneer. If no bidder is willing to pay the reserve price, the item is unsold at a profit of $0 for the auctioneer. I f only one bidder values the item at or above the reserve price, that bidder pays the reserve price. An auctioneer faces two bidders, each with a value of either $30.00 or $80.00, with both values equally probable. What reserve price should the auctioneer set, and what is the expected revenue from auctioning the item with and without a reserve price?
B. Extended Warranties
Your product fails about 20% of the time, on average some customers purchase the extended warranty you offer on which you will replace the products if it fails. Would you want to price the extended warranty at 2% of the product price? Discuss both moral hazard and adverse selection issues.
Reserve price = $30*50% + $80*50% = $45
Expected revenue with the reserve price
In this scenario, only the bidder who has set a $80 value will pay the reservation fee, then the expected revenue will be the reserve fee of $45
Expected revenue without the reserve ...
The expert examines the reserve prices and extended warranties in managerial economics.
Long Term Financing, Capital Stucture, Risk Management w/Acquisition Analysis
The calculations are difficult and I need help determining what formulas to use and what interpretation guidelines should be. The problem is vague so I am a little lost since it doesn't offer exact criteria. What I need is guidance through the problem and nudges in the right direction.
1: Report on Applied Materials long-term financing policy & capital structure.
a. Identify the firm's most recent long-term financing decision (e.g., debt, IPO, seasoned equity offering, secondary offering). Analyze the economic, business, and competitive background in which the financing occurred, and identify cost and risk trade-offs.
c. Discuss what changes you think would occur to your finance policy and capital structure if your firm was forced to consider re-organization and bankruptcy strategies.
d. Assume that your firm will be investing in the global market. What international investment and financing opportunities would you consider - and why? Also, discuss foreign exchange risk and give an example that analyzes how foreign exchange rates could cause a loss to the firm