BUS 475 Week 2 Knowledge Check
1. Compared with other approaches to business, the marketing concept is distinct in that it
• focuses on sales
• produces new products and services
• creates a broad assortment of products
• focuses on satisfying customers' needs
2. A company provides its advertising agency with a statement about a new product to use in designing an advertising campaign, and this statement includes a description of the target market, the product type, the primary benefits of using the product, and how this product is different from, and better than, competitive products. What type of statement is this?
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You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on your investment, how much will you sell the land for in 10 years? Note. Due to rounding and method of calculation, your answer might vary slightly. Choose the closest answer.
8. Bull Gator Industries is considering a new assembly line costing $6,000,000. The assembly line will be fully depreciated by the simplified straight line method over its 5-year depreciable life. Operating costs of the new machine are expected to be $1,100,000 per year. The existing assembly line has 5 years remaining before it will be fully depreciated and has a book value of $3,000,000. If sold today the company would receive $2,400,000 for the existing machine. Annual operating costs on the existing machine are $2,100,000 per year. Bull Gator is in the 46 percent marginal tax bracket and has a required rate of return of 12 percent. Calculate the net present value of replacing the existing machine. Note. Due to rounding and method of calculation, your answer might vary slightly. Choose the closest answer.
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9. A strong stock market and reasonably good earnings have caused the price of the firm's common stock to increase by 25%.
• This will have no effect on the firm's cost of capital.
• All things equal, this will increase the firm’s cost of capital.
• All things equal, this will lower the firm's cost of capital.
• This will only affect the cost of capital if the firm uses CAPM to compute the cost of equity.
10. Buying and selling in more than one market to make a riskless profit is called
• profit maximization
• international trading
• This cannot be determined from the above information.
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11. The United States imposes substantial taxes on cigarettes but not on loose tobacco. When the tax on cigarettes went into effect, the demand for home cigarette rolling machines most likely
• decreased, causing the price of cigarette rolling machines to fall and the quantity of machines purchased to fall
• decreased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to fall
• increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to rise
• increased, causing the price of cigarette rolling machines to rise and the quantity of machines purchased to fall
12. Keynes believed that an increase in savings would
• raise aggregate demand by reducing investment
• raise aggregate demand by increasing consumption