Two discussion questions for this week:

Question 1) Based on Chapter 8 - Capital Financing

Lease versus Purchase decision can be emotion based for personal issues.
But when dealing with 'OPM' (other peoples money) more care must be exercised.

Review Zelman, pages 393-395, (4th ed. page 389-392) and Exhibit 8.6 is an analysis of a lease versus purchase decision.
Explain why the cost of debt for a Five-Star General as non taxpaying entity would be 10%, not 7%.

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Question 2) Based on Chapter 9 - Costs Info to Make Special Decisions

The total contribution margin is total revenue minus the total variable cost. Thus it is what's left over, if any, to cover fixed cost.

Since some of fixed cost can be 'avoidable', then total contribution margin minus avoidable fixed cost is the product margin.

a) Discuss what you understand about the 'product margin decision rule'.
b) Relate an experience with the product margin decision rule to a make-or-buy, adding-or-dropping a service, or expanding-or-reducing a service decision, if any.