Total risk is the risk of a single assets, whereas market is its risk if is held in a large portfolio of

diversified securities. total risk therefore includes diversifiable and undiversifiable risk

Product needs may differ from country to county because of culture, climate, degree of economic

development, income, legal requirements, technical standards, and other factors. This barrier limits

the ability to achieve economies of scale in global procurement. The height of the barrier depends

on the cost of product modifications.

One effective means of developing and marketing new products is the use of line extensions (new

products in an already served category) and brand extensions. The concept behind extension is that

consumers are already familiar with the firm’s major brand names. Thus, if a new product carries the

same brand name, it will be more likely to succeed. Carrying an established brand name enables a

new product to more easily fill a niche in the marketplace. Furthermore, extensions make efficient

use of promotional costs because customers are already familiar with the quality of the products

created and manufactured under the brand. Most new products are line extensions.

The cash disbursements for the month of April include 40% of April purchases1 30% of March

purchases, 30% of February purchases, April payroll (10% of April sales), operating expenses (20% of

May sales)1 and an interest payment of $20,000.

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Because collections will be accelerated by 3 days at a rate of $300,000 per day, the company will

have an additional $900,000 to invest. Ata rate of 6%, the interest earned will be $54,000 per year.

However, the bank will charge $24,000 (12 months x $2,000 per month) for its services. Thus, the

firm will increase its income by $30000 ($54 .000 — $24 .000).

Planning is the determination of what is to be done, and of how, when, where. and by whom it is to

be done. Plans save to direct the activated that all organizational members must undertake to move

the organization from where it is to where it wants to be. Forecasting is the basis of planning because

it projects the future. A variety of quantitative methods are used in forecasting

According to Kotler (Marketing Management), brand equity is “the positive differential effect that

knowing the brand name has on customer response to the product or service.” It may be measure by

the incremental price a customer will pay for the product. An effect of brand equity is customer

preference for the brand when another product is essentially identical

Net working capital is defined as current assets minus current liabilities; Net working capital is

calculated as follows:

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Networking capital decreases by $10,000 from the current $540,000 to $530,000 under the proposal.

The concept of present value gives greater value to inflows received earlier in the stream. Thus, the declining inflows would be superior to increasing inflows, or even inflows.

If taxes are ignored, depreciation is not a consideration in any of the methods based on cash flows

because it is a non-cash expense. Thus, the internal rate of return, net present value, and payback

methods would not consider depreciation because these methods are based on cash flows. However,

the accounting rate of return is based on net income as calculated on an income statement. Because

depreciation is included in the determination of accrual accounting net income, it would affect the

calculation of the accounting rate of return.