Assignment 3: Long-Term Investment Decisions - 44469

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Assignment 3: Long-Term Investment Decisions
Due Week 9 and worth 300 points
Assume that the low-calorie microwavable food company from Assignments 1 and 2 wants to expand and
has to make some long-term capital budgeting decisions.
Use the Internet and Strayer databases to research government policies and regulation.
Write a six to eight (6-8) page paper in which you:
1. Outline a plan that managers in the low-calorie microwaveable food company could follow when
selecting pricing strategies for making their products as inelastic as possible. Provide a rationale
for your response.
2. Examine the major effects that government policies have on production and employment. Predict
the potential effects that government policies could have on your company.
3. Determine whether or not government regulation to ensure fairness in the low-calorie
microwavable food industry is needed. Cite the major reasons for government involvement in a
market economy. Provide two (2) examples of government involvement in a similar market
economy to support your response.
4. Examine the major complexities that would arise under expansion via capital projects. Propose
key actions that the company could take in order to prevent or address these complexities.
5. Suggest the substantive manner in which the company could create a convergence between the
interests of stockholders and managers. Indicate the most likely impact to profitability of such a
convergence. Provide two (2) examples of instances that support your response.
6. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not
qualify as an academic resource.
Solution Description

Introduction

A low calorie food or a healthy option of food is a new concept which has gained a lot of interest in the recent times. In the previous assignment we had discussed the background and the introduction of the company which wants to cater to this segment. This paper will discuss the long term capital budgeting decisions that such a company needs to make.

Pricing Strategy

The company aims to keep the prices of its products as inelastic as possible. This means that the pricing strategy should have no impact on the way the consumers perceive and buy such products (Definition of Inelastic, (n.d.)). Generally we see such demand only in situations in which the good or services are indispensable and the consumers cannot do without those. But this is not the case for microwavable food products. There is competition in the market to keep the prices under check. Hence the company needs to do 2 things to make its prices inelastic-

First of all the company needs to spend money on the R&D efforts to differentiate its products from the rest of the players. This differentiation could be on the basis of the core product, advisory service which comes along with the product, packing, availability, support services or virtually anything else.

As the second measure it needs to send down two important messages to its potential as well as current customers through its marketing communication efforts- First that the low calorie food should not be choice but be used as essential and second that the company serves this essential requirement like no one else does. Once the customers are aware and agreed with these two messages, price will play very minimum role in their buying decision (Price Elasticity of Demand, (n.d.)).