Answer:
Benzion Barlev of New York UniversityNEGOTIATION OF A LONG-TERM CONSTRUCTION CONTRACT
a. The probability that the contract will be profitable for the contractor is:
= 81%
b. The probability that the project will result in a loss for the contractor is:
= 19%
c. The value of R that the contractor should strive for in order to have a .99 probability of making a profit is:
= $1,246,100.
Explanation:
a) Data and Calculations:
Mean total cost (x) = $850,000
Standard deviation = $170,000
Revenue = $1,000,000
Probability of being profitable = (R - x)/std deviation
= ($1,000,000 - $850,000)/$170,000
= $150,000/$170,000
= 0.882
From Z table, 0.882 = 0.81057 = 81%
Probability of loss = 19% (100 - 81%)
To have a 99% (0.99) probability of making a profit, Z value = 2.33 from the Z table:
(R - x)/std deviation = 2.33
(R - x) = 2.33 * $170,000
= $396,100
(R - $850,000) = $396,100
R = $396,100 + $850,000
R = $1,246,100
Saul is a manager at Holden Apparels Inc. and is friends with the company's CEO. This privilege gives Saul the information that Holden Apparels is in the midst of talks to take over a leading rival. Saul buys stocks of Holden with the expectation that its stocks will appreciate. But the deal falls through and the stocks of Holden depreciate in the following months. Are Saul's actions unethical
Answer:
D) Yes, because it is unethical to trade stocks based on insider information
irrespective of the final outcome.
Explanation:
THIS ARE THE OPTIONS FOR THE QUESTION;
A) Yes, because it is illegal and unethical for Saul to possess any kind of insider
information.
B) No, because Saul did not make any profits from trading stocks using this
information.
C) No, because Saul did not ask the CEO to disclose such information to him.
D) Yes, because it is unethical to trade stocks based on insider information
irrespective of the final outcome.
From the question,we are told about Saul who is a manager at Holden Apparels Inc. and is friends with the company's CEO. This privilege gives Saul the information that Holden Apparels is in the midst of talks to take over a leading rival. Saul buys stocks of Holden with the expectation that its stocks will appreciate. But the deal falls through and the stocks of Holden depreciate in the following months. In this case, Saul's actions are unethical
because it is unethical to trade stocks based on insider information irrespective of the final outcome. Stock trading can be regarded as buying as well as selling of shares in a specific company. Unethical behavior in stock market are actions that falls outside morally right practice/trading in stock market. Unethical trading of stock could be a process of purchasing shares in particular firm that engages herself in some questionable operational as well as recruitment activities. In some cases it should be noted that stocks trading could be unethical as a result of trader engaging in trading because they are getting information from insider in order to influence their trading.
