Protect Ltd is an Australian leisure clothing company. It imports materials from Asia to produce high...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Protect Ltd is an Australian leisure clothing company. It imports materials from Asia to produce high quality clothing used by walkers and joggers. It has a large share of the domestic market, but in recent years also exported to Europe. These exports now represent 60% of all sales revenues. The research and development department has invented a new lightweight, breathable waterproof fabric. Initial primary and secondary market research has shown very positive results from existing customers and identified potential applications to a range of sports markets. To manufacture new garments using this fabric, Protect Ltd will need new manufacturing equipment. The research and development department believe that it can improve the fabric further to provide the strength necessary for contact sports such as rugby and American football. The board of directors recently identified three potential strategic options: 1. As the sports market is highly competitive, sell the patent for the new fabric to a leading sportswear manufacturer for $10 million. 2. Purchase machinery at a cost of $2 million to manufacture the new fabric as outdoor clothing. The estimated success of this option is 80% with returns of $20 million. However, the failure of the product in the market place would result in a loss of $5 million. 3. Conduct further research and development into improving the fabric for sports use. This would cost $2 million. Failure to produce a suitable fabric would result in a loss of $5 million. However, it is believed that there is a 60% chance of success. If a suitable fabric is produced then the firm would have another choice. They could either sell the patent for the improved fabric for $25 million, or choose to manufacture it themselves at a cost of $2 million. If they choose to manufacture, the estimated chance of a successful market launch is 50% with estimated returns of $72 million. However, if the market launch proves a failure, they would make a loss of $8 million. The board of directors are concerned about the economic conditions in Europe, with the expectation of increases in inflation and interest rates. Asian currency markets are also volatile with Asian exchange rates expected to rise. (a) Define the term primary market research. (b) Prepare a decision tree to show the three options available to Protect Ltd. the expected values of each, and identify the most profitable option. [2 marks] [8 marks] I Protect Ltd is an Australian leisure clothing company. It imports materials from Asia to produce high quality clothing used by walkers and joggers. It has a large share of the domestic market, but in recent years also exported to Europe. These exports now represent 60% of all sales revenues. The research and development department has invented a new lightweight, breathable waterproof fabric. Initial primary and secondary market research has shown very positive results from existing customers and identified potential applications to a range of sports markets. To manufacture new garments using this fabric, Protect Ltd will need new manufacturing equipment. The research and development department believe that it can improve the fabric further to provide the strength necessary for contact sports such as rugby and American football. The board of directors recently identified three potential strategic options: 1. As the sports market is highly competitive, sell the patent for the new fabric to a leading sportswear manufacturer for $10 million. 2. Purchase machinery at a cost of $2 million to manufacture the new fabric as outdoor clothing. The estimated success of this option is 80% with returns of $20 million. However, the failure of the product in the market place would result in a loss of $5 million. 3. Conduct further research and development into improving the fabric for sports use. This would cost $2 million. Failure to produce a suitable fabric would result in a loss of $5 million. However, it is believed that there is a 60% chance of success. If a suitable fabric is produced then the firm would have another choice. They could either sell the patent for the improved fabric for $25 million, or choose to manufacture it themselves at a cost of $2 million. If they choose to manufacture, the estimated chance of a successful market launch is 50% with estimated returns of $72 million. However, if the market launch proves a failure, they would make a loss of $8 million. The board of directors are concerned about the economic conditions in Europe, with the expectation of increases in inflation and interest rates. Asian currency markets are also volatile with Asian exchange rates expected to rise. (a) Define the term primary market research. (b) Prepare a decision tree to show the three options available to Protect Ltd. the expected values of each, and identify the most profitable option. [2 marks] [8 marks] I
Expert Answer:
Related Book For
Macroeconomics Principles, Applications, and Tools
ISBN: 978-0132555234
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez
Posted Date:
Students also viewed these accounting questions
-
A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $1,000 per diamond, and the demand for diamonds is...
-
In the past, a large share of expatriate managers from the United States have returned home before successfully completing their foreign assignments. Suggest some possible reasons for the high...
-
What motivates Wash burn's employees to produce high quality guitars? Do rock star endorsements of Wash burn guitars constitute a motivation factor or a hygiene factor, according to Herzberg's...
-
is an acute angle such that tan() =1/3. What is the value of 1010. (sin + cos)? 3.
-
Explain how two-bin systems work.
-
An investment offers $3,850 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value...
-
If \(A\) and \(B\) are mutually exclusive events, \(P(A)=0.45\), and \(P(B)=0.30\), find (a) \(P(\bar{A})\); (b) \(P(A \cup B)\); (c) \(P(A \cap \bar{B})\); (d) \(P(\bar{A} \cap \bar{B})\).
-
A survey of the business school graduates undertaken by a university placement office asked, among other questions, in which area each person was employed. The areas of employment included: 1....
-
The comparative financial statements prepared at December 31, 2015, for Prince Company showed the following summarized data: 2015 2014 Income statement: Sales revenue $190,200* $168,600 Cost of goods...
-
Braganza manufactures and sells 20 000 copiers each year. The variable and fixed costs of reworking and repairing copiers are as follows: Braganza's engineers are currently working to solve the...
-
b. Now implement another method, multipleOfChecker, that takes two arguments, both integers. It then prints whether or not the first number is a multiple of the second number. For instance:...
-
In response to the question How do you hire? Kasper Rorsted, CEO of Henkel, a consumer and industrial products company based in Dsseldorf, Germany, had this to say: I want to know who you are, who...
-
Individually or in teams, develop a five- to ten-minute presentation about maintaining civil communications in the workplace. Provide several scenarios that have happened or could happen in the...
-
One of the member functions in the Case Study needs an additional test. Which function is it, and what should the data be?
-
A bank knows that its demand deposits are normally distributed with a mean of $1,122 and a standard deviation of $393. A random sample of 100 deposits is taken. (a) What is the probability that the...
-
Suppose that historically 61 % of the companies on the NYSE have prices that go up each year. If random samples of 100 stocks are taken, what proportion of samples is likely to have between 55 % and...
-
The economy has three goods: A, B. and C. The prices of the goods are PA, PB and PC. The supply functions are as follows: QA 11+2PA-3PB + aPc QB = 9+6PB-PA-3Pc Qo = 2PC-3PA-3PB, where a is a...
-
Using the parallel-axis theorem, determine the product of inertia of the area shown with respect to the centroidal x and y axes. 6 in. 9 in. 9 in- 4.5 in. in. 4.5 in.
-
1. Arrow up or down: According to the law of demand, an increase in price ____ the quantity demanded. 2. From the following list, choose the variables that are held fixed in drawing a market demand...
-
1. Which of the following is not a component of aggregate demand? a. Consumption b. Investment c. Government expenditures d. The supply of money e. Net exports 2. In the Great Depression, prices in...
-
1. The marginal revenue product of labor equals _______ times______________. 2. A profit-maximizing firm will hire the number of workers where equals __________. 3. Your favorite professional team is...
-
What is the pro forma statement, and how important is it for a business?
-
Briefly compare replacement value to liquidation value of an asset.
-
Briefly describe what quality control is all about, and explain the three statistical types of control.
Study smarter with the SolutionInn App