value maximization

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GROUP ASSIGNMENT OF MANAGERIAL ECONOMICS: 

GROUP ASSIGNMENT OF MANAGERIAL ECONOMICS PRESENTED BY: PREM KUMAR MAHTO RAJNISH RANVEER RASHMI ASHUTOSH

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Q-Give reasons why authors who receive a fixed percentage of the books sales revenue as royalties would never fix the same price, if they could, as their publishers? Question 1

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This is a contingent contract. The standard royalty is 15%. The author don’t trust to the publisher to report profit or costs accurately. Fixed fees are almost never used . ROYALTY

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Even without falsifying its accounts, the publisher can report very low profit levels 2 . Authors put more trust in the revenue reported by the publisher 3. The publisher is not interested in maximizing joint profit. It wants to maximize its profit net of royalties 4 . An author who receives a royalty that is a percentage of revenues

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Q2-Value maximization has become the major objective of a modern firm. Comment ? Question 2

VALUE MAXIMIZATION: 

VALUE MAXIMIZATION Increases in owners' wealth achieved by maximizing of the value of a firm's common stock.

APPROCH: 

APPROCH TRADITIONAL MODERN

PROFIT MAXIMIZATION: 

PROFIT MAXIMIZATION The traditional approach of management was all about profit maximization . P rofit maximization always concern with the operational plans It used for short run . It ignores social responsibility of business Two ways to maximize the profit (1)by taking risk (2) by innovation

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Wealth maximization simply means maximization of shareholder’s wealth. under wealth maximization, more importance is given to cash flows rather than profitability. wealth maximization always concern with top managements plans . maximization of wealth approach believes that money has time value . Wealth = Present Value of cash inflows – Cost. modern and improved approach of wealth maximization, a new initiative called “ Economic Value Added (EVA) ” WEALTH MAXIMIZATION

FUNCTION OF WEALTH MAXIMIZATION: 

FUNCTION OF WEALTH MAXIMIZATION It measures the benefit in terms of cash flow and avoids the ambiguity associated with the accounting profits. It consider both quality and quantity dimensions of benefits.

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Q-What do you think should be the important variables considered while estimating the demand for: [a] cement, [b] sugar [c] petrol and [d] toys

6 Variable effecting the demand: 

6 Variable effecting the demand P= Price of the good or service M = consumers’ income . Pr= price of related goods or services T = taste patterns of consumers Pe = expected price of the goods in some future period, N = number of consumers in the market .

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Price of the good or service consumers’ income . price of related goods or services taste patterns of consumers expected price of the goods in some future period, number of consumers in the market Cement

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TOYS Price of the good or service consumers’ income . price of related goods or services taste patterns of consumers Technology and advertisement Number of consumers in the market

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Price of the good or service consumers’ income . price of related goods or services taste patterns of consumers expected price of the goods in some future period, number of consumers in the market Sugar

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Price of the goods or service consumers’ income . price of related goods or services taste patterns of consumers expected price of the goods in some future period, number of consumers in the market Petrol