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Honda Motor Company is considering offering a $2,100 rebate on its minivan, lowering the vehicle's price from $30,400 to $28,300. The marketing group estimates that
Honda Motor Company is considering offering a $2,100 rebate on its minivan, lowering the vehicle's price from $30,400 to $28,300. The marketing group estimates that this rebate will increase sales over the next year from 41,100 to 53,700 vehicles. Suppose Honda's profit margin with the rebate is $5,090 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) Suppose your employer offers you a choice between a $5,000 bonus and 100 shares of the company's stock. Whichever one you choose will be awarded today. The stock is currently trading at $62.92 per share. a. Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus should you choose? What is its value? b. Suppose that if you receive the stock bonus, you are required to hold it for at least one year. What can you say about the value of the stock bonus now? What will your decision depend on? a. Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus should you choose? What is its value? If you are free to trade the stock, the value of the stock bonus today is $ (Round to the nearest dollar.)
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