managers must make. When managers make decisions that maximize firm profits, they simultaneously maximize shareholder wealth and promote efficient allocation of resources. Managers drift away from this objective when they concentrate on their own security. To avoid non-profit maximizing behavior, a growing number of firms are structuring compensation plans for managers that promote long-term profitability. Shareholder Wealth Maximization 1. To align the interests of the shareholders of Salomon
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is the profit maximization theory because it’s the most simple and it concentrates on the main point of business. The goal of a firm is to maximize profits while making ethical decisions at the same time. There are both pros and cons of each theory but in profit maximization the Pros outweighs the cons. The primary focus is to maximize profits. Maximizing profits is more valuable than attaining social responsibility. I believe that the business is most successful when you maximize profits then everything
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America has become one of the busiest countries in the world. Each year families are spending less time together; which means that more families are relying on eating out but more on microwaveable foods. Considering the increase in the disposable income, more people are able to afford better lifestyle. However, there has been a change in the styles of cooking in the current markets. With microwaveable food being so popular, the focus is now on how can we make these products healthier. So manufacturers
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his first and regular customer. Taking the order was a good opportunity for Harriman International since it will yield to a high amount of revenue, which will qualify the company for incentives provided by the Indian government. Moreover, The huge profit involved in the project was an opportunity for Dhawan to keep some of his workers on the payroll. However, despite all the benefits involved in this particular order, Dhawan is facing one challenge: the required deadline for the goods delivery (April
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Part 1 Quality Data, a) 75% of hospital patients would recommend the hospital, 67% Maryland average, and 71% national average. b) The rate of readmission for Pneumonia patients is not available for the hospital or the national rate due to data suppressed for one or more quarters by CMS. c) 9.4% of patients at P.R.M.C had a follow-up mammogram, within 45 days, compared to the Maryland average of 9.5% and national average of 8.8%. Peninsula Regional Medical Center in Salisbury, Maryland is above
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investment decisions facing the firm. Your marketing group estimates that Hair Grow has the following demand curve: P= 101 - .00002 Q 1- Your marginal cost for producing a Hair Grow pill is $1. What is the profit maximizing price and quantity? What is your profit? Profit maximization MR=MC MC (Q) = 101 - .00002 Q 1 = 101 – 2 (.00002) Q 1 = 101 - .00004Q 101 - .00004Q = 1 -.00004Q = 1 -101 Q= -100 / -.00004 Q= 2,500,000 units P= 101 - .00002 Q P= 101 - .00002 (2,500,000) P= 101
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distinction between business and economic profit? The difference between the business profit which is useful for accounting and tax purposes and economic profit is that in economic profit, profit is calculated by revenue of the firm minus its explicit costs and implicit costs. On the other hand, business profit refers to the revenue of the firm minus the explicit or accounting cost of the firm. Now, in business accounting normal return is the minimum profit that is required to cover the expenditures
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1 —From the end-of-chapter discussion questions (DQ) and problems (P) Salvatore’s Chapter 1: a. Discussion Questions: 9. How is the concept of a normal return on investment related to the distinction between business and economic profit? b. Problems: 6, 9, and spreadsheet problem (p. 37). 6. Deterimine which of the two investemtn projects of problem 5 the manager should choose if the discount rate of the firm is 20%. 9. A woman managing a photocopying
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Answer: Normal return is the minium profit that is required to cover the costs of inputs and all of expenses associated with it. Economic profit is a forgone profit and not and economic profit which is the biggest difference between the two types of profits. The difference between economic profit and business profit is that in economic profit, profit or loss is calculated by subtracting opportunity cost of the inputs from the revenue of sales. Business profit is the difference between the total
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long run equilibrium because in a long run equilibrium enter and exit the market and neither economic profits nor economic losses is possible. In the long run the firm makes zero economic profit. 3. MC MC Q Q ATC ATC MC = MR MC = MR Qprofit max Qprofit max P P MAXIMUM PROFIT 4. The point where MC starts rising (the upward sloping portion) shows the various quantities
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