Answer own your words. Question 1 . Twin Donuts restaurant introduces a new prom
ID: 386760 • Letter: A
Question
Answer own your words.
Question 1.
Twin Donuts restaurant introduces a new promotional advertisement “Buy three donuts for $2.50; regularly costs $450.00 and get the four one free. This Ad will end will end September 30, 2018.
Explain what does each of the following situation best represents and then choose your best answer?
Producer-producer rivalry.
Consumer-consumer rivalry.
Producer-consumer rivalry.
Question 2.
What is the difference between Present Value and the future value of an asset?
Offer an example
What is meant by the opportunity cost of an item or activity? Give an example in support of your answers
What is the maximum amount you would pay for an asset that generates an income of $ 1,000 at the end of each of the two years when the opportunity cost of using funds is 5 percent?
Instructions:Show your work and define all steps
Explanation / Answer
Question1. Producer-producer rivalry - It is the competition between the producers of goods and services who use strategies to acquire the customer base in a market.
Consumer - Consumer rivalry - It is the market condition where the consumer lack bargaining power as a result of scarcity of goods and services.
Producer -Consumer rivalry - In this situation, the producers and consumers have competing interests as consumers bargain for low prices and sellers demand high prices. As a result , there is not much scope for profits for producers and bargains for consumers.
The situation of Twin Donuts restaurant introduces a new promotional advertisement . The offer ends on September 30, 2018. This situation represents Producer producer rivalry.
Question 2.
Difference between Present Value and the future value of an asset - Present value of an asset is the current value of an asset which is calculated by discounting the future cash flows at a pre decided discount rate. Future value is the value of an asset on a future date. It is only value and shows the total gain on investment involving interest rate. For example, present value of a dollar is more since if it is invested today, it can earn interest over an year. The future value will be 1.10 dollar calculated on 10 % interest rate.
Opportunity cost is the cost of an item or activity which is forgone as a result of tradeoff between two or more choices. An example is if a person chooses an online coaching to upgrade skills instead of vacation, the opportunity cost is the vacation of choosing the other alternative. It is the relative cost that is incurred to get an item and giving up the other item.
The maximum amount to pay for an asset that generates an income of $ 1000 at the end of each of the two years when the opportunity cost of using funds is 5 percent can be calculated as below :-
Present Value = ( 2000/1+.05) + (2000/(1+0.05)*2) = 5909
rate of return is 5 percent and 2 is the number of years, $ 2000 is the total future value of the asset at the end of two years.