# Question: Remox Corporation is a British firm that sells high fashion sportswear

Remox Corporation is a British firm that sells high-fashion sportswear in the United States. Congress is currently considering the imposition of a protective tariff on imported textiles. Remox is considering the possibility of moving 50 percent of its production to the United States to avoid the tariff. This would be accomplished by opening a plant in the United States. The following table lists the profit outcomes under various scenarios:

Remox hires a consulting firm to assess the probability that a tariff on imported textiles will in fact pass a congressional vote and not be vetoed by the president. The consultants forecast the following probabilities:

Probability

Tariff will pass ........ 30%

Tariff will fail ........ 70

a. Compute the expected profits for both options.

b. Based on the expected profit only, which option should Remox choose?

c. Compute the probabilities that would make Remox indifferent between options A and B using that rule.

d. Compute the standard deviations for options A and B facing Remox Corporation.

e. What decision would Remox make using the mean–variance rule?

f. What decision would Remox make using the coefficient of variationrule?

Remox hires a consulting firm to assess the probability that a tariff on imported textiles will in fact pass a congressional vote and not be vetoed by the president. The consultants forecast the following probabilities:

Probability

Tariff will pass ........ 30%

Tariff will fail ........ 70

a. Compute the expected profits for both options.

b. Based on the expected profit only, which option should Remox choose?

c. Compute the probabilities that would make Remox indifferent between options A and B using that rule.

d. Compute the standard deviations for options A and B facing Remox Corporation.

e. What decision would Remox make using the mean–variance rule?

f. What decision would Remox make using the coefficient of variationrule?

## Answer to relevant Questions

At the beginning of the year, an audio engineer quit his job and gave up a salary of $175,000 per year in order to start his own business, Sound Devices, Inc. The new company builds, installs, and maintains custom audio ...What is the present value of a firm with a five-year life span that earns the following stream of expected profit? (Treat all profits as being received at year-end.) Use a risk-adjusted discount rate of 12 percent. ...Construct a graph showing equilibrium in the market for movie tickets. Label both axes and denote the initial equilibrium price and quantity as P0 and Q0. For each of the following events, draw an appropriate new supply or ...Janice Waller, the manager of the customer service department at First Bank of Jefferson County, can hire employees with a high school diploma for $20,000 annually and employees with a bachelor’s degree for $30,000. She ...Return to Applied Problem 1 and suppose the managers of the firm decide on the following subjective probabilities of congressional action on OINC: ProbabilityOINC passes ........ 40%OINC fails ...Post your question