Last year, medsupplies - a national supplier of medical devices - posted its first loss in six years. the loss was a surprise to investors since the industry as a whole has been growing. analysts have reached a consensus that at least part of the blame for the loss falls on heidi stevens, the national sales manager for medsupplies. ms. stevens is responsible for determining the size of the firm's sales force, and over the past year, she engaged in a significant expansion. in this industry, it is well understood that revenues generally increase as the sales force grows. however, each new hire generally adds less new revenue than the last, as the best sales opportunities already have been exhausted. at the same time, the salaries for medical device salespeople essentially have been constant. analysts summarize the problem in the figure below. they note that ms. stevens appears to have expanded her sales force to point a and argue that her sales force is too big. when approached for comment, ms. stevens replied, "of course i would choose point a in that graph! anything less means the company underperforms." both the analysts and ms. stevens agree that she has chosen point a in the graph as the size of her sales force but disagree on the wisdom of this decision. who is right

Recently, verizon wireless ran a pricing trial in order to estimate the elasticity of demand for its services. the manager selected three states that were representative of its entire service area and increased prices by 5 percent to customers in those areas. one week later, the number of customers enrolled in verizon's cellular plans declined 4 percent in those states, while enrollments in states where prices were not increased remained flat. the manager used this information to estimate the own-price elasticity of demand and, based on her findings, immediately increased prices in all market areas by 5 percent in an attempt to boost the company's 2016 annual revenues. one year later, the manager was perplexed because verizon's 2016 annual revenues were 10 percent lower than those in 2015"the price increase apparently led to a reduction in the company's revenues. did the manager make an error? yes - the one-week measures show demand is inelastic, so a price increase will decrease revenues. yes - the one-week measures show demand is elastic, so a price increase will reduce revenues. yes - cell phone elasticity is likely much larger in the long-run than the short-run. no - the cell phone market must have changed between 2011 and 2012 for this price increase to lower revenues.

Bonds often pay a coupon twice a year. for the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. using the values of cash flows and number of periods, the valuation model is adjusted accordingly. assume that a $1,000,000 par value, semiannual coupon us treasury note with three years to maturity has a coupon rate of 3%. the yield to maturity (ytm) of the bond is 7.70%. using this information and ignoring the other costs involved, calculate the value of the treasury note:

M. cotteleer electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. one of the components has an annual demand of 235 units, and this is constant throughout the year. carrying cost is estimated to be $1.25 per unit per year, and the ordering (setup) cost is $21 per order. a) to minimize cost, how many units should be ordered each time an order is placed? b) how many orders per year are needed with the optimal policy? c) what is the average inventory if costs are minimized? d) suppose that the ordering cost is not $21, and cotteleer has been ordering 125 units each time an order is placed. for this order policy (of q = 125) to be optimal, determine what the ordering cost would have to be.