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Essay / Research Paper Abstract
This 10 page paper shows the student how a complex business decision can be made. A printing company have to choose whether to publish a new magazine, and if they go ahead with different types of promotions which have different probabilities of sales levels. The paper shows how the results can be calculated by looking at different pricing options and different promotion options, using the level of contribution to assess the break even point and the potential profit. The best option for promotion and pricing plan are then used to assess if the project should go ahead. This information is then used to assess an offer to purchase the firm made by a rival compnay. All calculations are shown and a decision tree is shown.
Page Count:
10 pages (~225 words per page)
File: TS14_TEppldec.rtf
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Unformatted sample text from the term paper:
looking at the choices that face Popular Press Ltd (PPL), there are two main choices, the first it whether or not to publish a new travel magazine called go, the
second is whether or not to sell the company to an American company who are offering ?900,000, which is stated as being three times the average annual profit. This tells
us that the annual profit is usually ?300,000. He owners of the business need to determine which move they think will be the most profitable. If we assume that
the decision needs to be made based on the next three years, as a new venture could be undertaken and running at the end of the three year period if
the company was old, this allows us to make some calculations. The first element of the decision is therefore which is the most financially advantageous in the short
term. The way that it is measured needs to remember that the purchase will have cash up front and as such this future revenue streams would need to be discounted
to gain a like for like comparison, using tools such as net present value (NVP) and the internal rate of return. The long term may also be considered, allowing for
the ease with which a new long term income generation may be developed and replace the current company. The magazine that is proposed may result in increased profit
that will make the offer appear undervaluing the firm, however, it is also possible that the magazine would have poor results, especially if another company did manage to gain a
first mover advantage by launching magazine first. There also the issue of the impact that this may have on the existing operations. There as been noted the need to
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