1. Honda Motor Company is considering offering a $ 2100 rebateon itsâ minivan, lowering theâ vehicle's price from $ 30300 to $28200. The marketing group estimates that this rebate will increasesales over the next year from 41600 to 54100 vehicles. SupposeâHonda's profit margin with the rebate is $ 5940 per vehicle. If thechange in sales is the only consequence of thisâ decision, what areits costs andâ benefits? Is it a goodâ idea?â Hint: View thisquestion in terms of incremental profits. The cost of the rebatewill be â$ ______ million. â(Round to one decimalâ place.)
2. Suppose your employer offers you a choice between a $ 5100bonus and 100 shares of theâ company's stock. Whichever one youchoose will be awarded today. The stock is currently trading at $62.52 per share.
a. If you receive the stock bonus and you are free to tradeâ it,which form of the bonus should youâ choose? What is itsâ value?
If you are free to trade theâ stock, the value of the stockbonus today is
â$________â(Round to the nearestâ dollar.)
b. If you receive the stock bonus and you are required to holdit for at least oneâ year, what can you say about the value of thestock bonusâ now? What will your decision dependâ on?
1. Honda Motor Company is considering offering a $ 2100 rebateon itsâ minivan, lowering theâ vehicle's price from $ 30300 to $28200. The marketing group estimates that this rebate will increasesales over the next year from 41600 to 54100 vehicles. SupposeâHonda's profit margin with the rebate is $ 5940 per vehicle. If thechange in sales is the only consequence of thisâ decision, what areits costs andâ benefits? Is it a goodâ idea?â Hint: View thisquestion in terms of incremental profits. The cost of the rebatewill be â$ ______ million. â(Round to one decimalâ place.)
2. Suppose your employer offers you a choice between a $ 5100bonus and 100 shares of theâ company's stock. Whichever one youchoose will be awarded today. The stock is currently trading at $62.52 per share.
a. If you receive the stock bonus and you are free to tradeâ it,which form of the bonus should youâ choose? What is itsâ value?
If you are free to trade theâ stock, the value of the stockbonus today is
â$________â(Round to the nearestâ dollar.)
b. If you receive the stock bonus and you are required to holdit for at least oneâ year, what can you say about the value of thestock bonusâ now? What will your decision dependâ on?
