deliv 7

User Generated

nsebchax

Business Finance

Description

i need corrections made on the assignment. i will attach the assignment i did, teacher recommendations for passing, and the assignment requirements.

Competencies

  • Understand economic terminology and economic definitions pertaining to decisions made by managers.
  • Explain and demonstrate knowledge of concepts including the supply/demand relationship, price ceilings and floors, and market surpluses and shortages.
  • Elasticity, consumer choice, utility, productivity, and nature of costs.
  • Demonstrate how economic theory contributes to strategic managerial decision-making.
  • Understand various market structures and impacts upon firms, consumers, and government policies.
  • Calculate profits and profit maximization in order to determine the optimal price and output at which firms should produce.

Course Scenario

Oil Company X is a large oil refinery which has been expanding and taking on new investment projects. Recently, they have considered building a pipeline that stretches across the United States, from Canada to New Orleans.

As a cost analyst at Oil Company X, submit a proposal to the board of the company critiquing the costs and benefits of building a new oil pipeline that stands to generate copious amounts of revenue. Include in your report the following: expected changes to supply and demand, a cost analysis of the project, the cross-price elasticity of an alternative energy source, cost curves, the new expected profit-maximizing quantity and price of oil after completion, a risk assessment evaluating liabilities from potential environmental damage, and a final recommendation.

Instructions

Use the Excel document below to complete the assignment, and submit it to the Drop Box when finished. Student Excel Spreadsheet

As an economic analyst at your firm, you are being asked to evaluate this investment opportunity and submit a 5-page proposal as a Word document.

You must include an explanation of expected changes to supply and/or demand from economic shocks such as natural disasters and recessions, as well as the anticipated effect of substitute goods (alternative energy sources) flooding the oil market. Be sure to include the expected impact on equilibrium quantity and price in your regional market from these potential changes.

Another team member in the Cost Analysis Department has compiled the necessary data in the attached spreadsheet below. The total upfront cost of this project is $10 million, with $1.72 million in fixed costs. Be sure to include in your proposal any relevant curves graphed from the data in the spreadsheet. Your Excel spreadsheet needs to include the following columns in addition to what has been given to you:

  1. TFC
  2. TVC
  3. ATC
  4. AVC
  5. MC

Assume that your firm will hold market power as a supplier of oil in your region, due to extensive trade restrictions the government has agreed to put in place after completion of the pipeline. Define the new market structure, and give new pricing strategies the firm can use to maximize profits for this particular market structure.

You will also include graphs to show new expected profit-maximizing quantity and price of oil after completion. After determining the profit-maximizing price and quantity, as well as the corresponding average variable cost, determine the expected total profit for the 15-year duration the pipeline will be in operation.

Be sure to also include a calculation of the cross-price elasticity of the alternative energy source and oil. Assume the current price of oil is $50/gallon of crude oil. If the price increases to the profit-maximizing price, the quantity demanded of the alternative energy source increases by 20%. Explain if these goods are complementary goods, substitute goods, or non-related goods. If there is a relationship, indicate whether the relationship is weak or strong. Justify your answer with an explanation based on the elasticity figure.

Assume there is a 10% probability of the pipeline leaking, with an expected liability of $3.2 billion which will be deducted from total profit. There is a 90% probability the pipeline will not leak. Determine the expected return on this investment, as well as the variance.

The firm also has an alternative investment which will yield $1.6 billion over the course of the same 15-year period, with a probability of 80%, or $1.15 billion with a probability of 20%. Calculate the expected return, as well as the variance. The risk should be expressed as the standard deviation.

Perform a marginal analysis to determine if the firm should build the pipeline, considering currently available investments and opportunity costs.

Format your proposal to include a title page, introduction, conclusion, and references. Include all relevant graphs, equations, and calculations. Show your work on calculations to ensure you receive partial credit for incorrect answers. No credit will be given if your work is not shown. Remember to cite your sources using correct APA format, and also use correct grammar, spelling, and formatting.

teacher response:


I was reviewing your Deliverable 7 submission and noticed that you did not include any calculations in your work. You were given data to input in an Excel file that included the following columns in addition to what has been given to you:

1. TFC

2. TVC

3. ATC

4. AVC

5. MC

Unformatted Attachment Preview

MANAGEMENT OF COMPANY X Management of Company X Tashara Cooper Deliverable #7 2 MANAGEMENT OF COMPANY X Proponents for the Oil Company X, argue that it will allow the countries involved to increase their energy security and reduce their dependence on the foreign oils and energy. There is need for the company to focus on the production function, which shows how much output of the oil products will be produced with a given amount of capital and labor. Overlooking the proportionality between production and the output may adversely affect Company X performance. The building of the pipeline of course is expected to increase the costs and the revenue. There is an expected change in the degree of supply and demand curve. Additionally, there will be the need to check on the cross price elasticity of an alternative energy source just in case the demand goes low or high thereby affecting the profits expected to be accrued. The construction of the pipeline by the Company X from the United States, Canada, to the New Orleans means that there will be a need to consider the capital available to undertake the project. For Canada, the whole idea looks like a clear benefit, with eight hundred and thirty thousand barrels a day of promised new pipeline capacity in order to accommodate the surging oil demands. However, this is all a dream which will be faced with many difficulties and need proper and effective cost management policies. There is therefore the need to have a strong monetary policy since some goons may take it for an opportunity to extort the government. For instance, the estimated number of casual workers is supposed to be 4000 in Canada zone. However, the contractor has placed an order of about 9000 casual laborers. This is direct opportunism. What is of essence here is for the contractors to note that, this are not permanent jobs. They are temporally positions that will see workers spending months or years laying down the pipes. TransCanada has an estimated cost from its expected a report that it will disburse over $ 3 MANAGEMENT OF COMPANY X 1.8 billion into the project. It’s also expected to release funds to finance all the equipment required to start and complete the pipeline construction. All the expected steel is to come from japan through Calgary Company. Much of the steel processing plant is located in Canada which means that Canada will only be exporting the raw steel from Japan and manufacturing the desired quality and quantity of steel. This equates to a direct profit since Canada is involved in its own production thereby reducing the production costs. The estimated job employment rate for Canada: 5000, for the direct and indirect persons. Expected net salaries per year: $ 48 million. Ongoing benefits for Canada: $ 10 million less taxes Jobs, in person, U.S: 6000, state department and full time. 7000 direct plus 2500 spin off, (this indicates over employment) Construction cost, U.S: $4.6 billion for the state department U.S. Oil movement: 26000 barrels a day for the TransCanada Impact of the construction of the pipeline: The impact is unclear. The oil production and transportation might have little impact on the Canadian Oil and gas. This is because the already existing trains and motors are consuming more and more oil and transport. So even without the Company X, Canadian oil still has many other ways to transport and market. Conversely, stopping the Company X will result to slowing the growth in the oil sands, and some financial analysts agree. However, how much it will cost the company is difficult to 4 MANAGEMENT OF COMPANY X calculate since even the first phase is yet to be completed. The only existing thing is drafted ideas. Another consideration to make and give a go ahead is that, pipelines are cheaper to construct, reduce road carnage, reliable and fast for the movement of crude oil. The truck, rail and barge movement can cost an estimate of $30 per barrel. Company X will move the oil and the products for substantially less cost leaving more profit for the company who are the energy producers. There is also the need to adopt monopoly competition in order to fill the niche that other potential oil marketers may try to get a loop in. a monopoly refers to the market structure where a single firm has the control of the entire market. In this scenario, Company X has to adopt the highest level of market power, as the consumers will lack an alternative. This will result to Company X maximizing the profits, setting the prices for the oil as well as dominating in the TransCanada region. Additionally, there are a number of managerial decisions that have to be considered. They include: ➢ Deciding the price of the oil product and the quantity of the commodity to be produced. ➢ Choosing a production technique that minimizes the cost and maximizes on the profits. ➢ The decision on whether to manufacture the steel for constructing the pipelines or buying already made from Japan. ➢ Deciding the level of the inventory to adopt and maintain. ➢ Deciding on the advertising media and the intensity of the advertising campaign in order to create awareness among the states. 5 MANAGEMENT OF COMPANY X ➢ Deciding on the employment techniques, and the formal training required for the full time workers. ➢ Making further decisions regarding further business investment and the mode of financing the Company X. The primary goal of the business is to maximize profits. These expected future profits are converted into the present value by discounting the expenses and giving an appropriate interest rate. For instance, assuming that the firm expects a profit of $100000 annually and $200000 in the second year, then it can be predicted the rate of growth margin for the Company X, with the rate of interest being 5% per annum. Thus, $100000 a year from now is only equal to about $ 90091 at the present ($100000/ (1+0.1) = $ 90091. This value is expected to rise annually by a given percentage. The upward function shows how much output can be accrued with a given amount of capital and labor. Worth noting is that the production cost can shift due to the supply of the raw materials and which affects the overall productivity. 6 MANAGEMENT OF COMPANY X The marginal product of the capital (MPK) is the output produced per unit of the additional capital. The marginal revenue product of labor indicates the benefits to the Company X for hiring additional workers in times of high oil-products demand. Comparing the profit with the cost, Company X will hire additional workers as long as the marginal revenue product of the labor exceeds the nominal wage. The profits will be at their highest when the marginal revenue product of labor just equals the nominal wage. 7 MANAGEMENT OF COMPANY X Reference Simon, H. A. (1959). Theories of decision-making in economics and behavioral science. The American economic review, 49(3), 253-283. Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. (2000). Strategy in emerging economies. Academy of management journal, 43(3), 249-267. Storey, D. J. (2016). Understanding the small business sector. Routledge. McWilliams, A., & Siegel, D. S. (2011). Creating and capturing value: Strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management, 37(5), 1480-1495. Hansen, D., Mowen, M., & Guan, L. (2007). Cost management: accounting and control. Cengage Learning.
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Explanation & Answer

hello, here is the excel file with the calculations. pleas go through it and let me know if there is anything that you need changed so that i can do so before the time elapses. thank you

PRICE
$58,50
$58,10
$57,70
$57,30
$56,90
$56,50
$56,10
$55,70
$55,30
$54,90...


Anonymous
I was having a hard time with this subject, and this was a great help.

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