McBean Co was considering the opportunity that lied ahead with two separate management consulting potential clients, Vision1 and Purple Ray Optics Inc (PRO Inc ) Vision1 was willing to pay in advance for the work they needed, and had put up $1,000,000 on the table for McBeans services PRO Inc on the other hand was willing to pay as the project progressed over the next 2 years The payment schedule they suggested was $300,000 at the contract signature, $400,000 at the end of year 1, and another $500,000 at the end of the project in year 2 Questions If both Vision1 and PRO projects will last for 2 years, and McBean has no concerns that PRO would pay as promised, and McBean has all the resources to engage with either at a similar cost, which customer should they retain, given they have capacity for only one of the two Explain your logic and show calculations McBeans discount rate is 12 per year (6 points) If instead, a 3 rd customer shows up, RedBox Management LLC, and is willing to engage McBean for a period of 2 years as well, and is willing to pay $50,000 per month for a period of 2 years Questions Whats the concept involved here, and which Chapter in the textbook speaks about this concept (2 points) All else equal, should McBean choose RedBox over Vision1 or PRO Why Show calculations Hint It is fair to assume the 12 per year is the annual effective rate, and that one twelfth of that would be the monthly discount rate (6 points) At the last moment, a new client, Nifty Streaming shows up as a potential client as well They want to retain McBean forever, at a monthly flat retainer fee of $10,000 Susan Pavlovski, the McBean CEO is intrigued now She knows that her company has no issue with open ended contracts, especially with potential clients like Nifty Streaming Questions What concept that we learned in Ch 4 and or 5 is this related to (be specific) (2 points) Now Susan has a luxury problem She has 4 POTENTIAL clients and she can has to choose ONLY ONE Should she choose Nifty over RedBox, Vision1 or PRO Why Please show your calculations (5 points) ANY calculations to show could be (a) either mathematical formulas, OR (b) the keys on the calculator along with the figures keyed, (c), OR the Excel formula along with the figures there, OR (d) the factors from the tables on pages 622 629 of the textbook

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Mar 02, 2023

McBean & Co. was considering the opportunity that lied ahead with two separate management consulting potential clients, Vision1 and Purple Ray Optics Inc (PRO Inc.).

Vision1 was willing to pay in advance for the work they needed, and had put up $1,000,000 on the table for McBean’s services. PRO Inc on the other hand was willing to pay as the project progressed over the next 2 years. The payment schedule they suggested was $300,000 at the contract signature, $400,000 at the end of year 1, and another $500,000 at the end of the project in year 2.

Questions:

If both Vision1 and PRO projects will last for 2 years, and McBean has no concerns that PRO would pay as promised, and McBean has all the resources to engage with either at a similar cost, which customer should they retain, given they have capacity for only one of the two? Explain your logic and show calculations. McBean’s discount rate is 12% per year. (6 points).

If instead, a 3^rd customer shows up, RedBox Management LLC, and is willing to engage McBean for a period of 2 years as well, and is willing to pay $50,000 per month for a period of 2 years.
1. Questions:
  1. What’s the concept involved here, and which Chapter in the textbook speaks about this concept? (2 points)
  2. All else equal, should McBean choose RedBox over Vision1 or PRO? Why? Show calculations. Hint: It is fair to assume the 12% per year is the annual effective rate, and that one twelfth of that would be the monthly discount rate. (6 points)
2. At the last moment, a new client, Nifty Streaming shows up as a potential client as well. They want to retain McBean forever, at a monthly flat retainer fee of $10,000! Susan Pavlovski, the McBean CEO is intrigued now. She knows that her company has no issue with open-ended contracts, especially with potential clients like Nifty Streaming.
  1. Questions:
    1. What concept that we learned in Ch 4 and/or 5 is this related to (be specific)? (2 points)
    2. Now Susan has a luxury problem. She has 4 POTENTIAL clients and she can/has to choose ONLY ONE. Should she choose Nifty over RedBox, Vision1 or PRO? Why? Please show your calculations. (5 points)

ANY calculations to show could be (a) either mathematical formulas, OR (b) the keys on the calculator along with the figures keyed, (c), OR the Excel formula along with the figures there, OR (d) the factors from the tables on pages 622-629 of the textbook.