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NEW QUESTION: 1
You have a choice of accepting a fixed price contract for $115,000 with a liquidated damages clause or $100,000 without the clause. There is a 60% chance your cost will be $90,000 and 40% chance your cost will be $80,000. There is a 98% chance of meeting your schedule but the penalty if missed is $50,000. Which is the best contract choice and how much profit would you make?
A. Contract with the clause; profit is $14,000
B. Contract without the clause; profit is $14,000
C. Contract without the clause; profit is $27,980
D. None of the above
Answer: D
Explanation:
A liquidated damages clause is a clause in the contract that specifies a dollar amount to be paid if some provision of the contract is not met. It is a way of contractually setting the damages for some failure to perform. The answer to the problem is (from a previous post):You get the expected value multiplying an outcome by the probability of it occurring, and adding up these products for all outcomes. For the contract without the clause, you get paid $100,000. One outcome is that you will spend $90,000. Your profit will be $10,000. There is a 60% chance of this outcome occurring, so you get $10,000*0.6=$6,000. The other outcome is that you will spend $80,000. Your profit will be $20,000. There is a 40% chance of this outcome occurring, so you get $20,000*0.4=$8,000. If you add these two up, you get$14,000. If you decide to take the $100,000 contract, your "average" profit will be $14,000.For the contract with the clause, you get paid $115,000. If you will spend $90,000, your profit will be $25,000. There is a 60% chance of this outcome occurring, so you get $25,000*0.6=$15,000. If you spend $80,000, your profit will be $35,000. There is a 40% chance of this outcome occurring, so you get $35,000*0.4=$14,000. Since the problem doesn't say otherwise, assume that no matter how much you spend, there is a 2% of missing the schedule. If you do, you pay $50,000. $50,000*0.02=$1,000. You will subtract this amount from the total, since this money would come out of your profit. If you add these all up, you get $15,000+$14,000-$1,000=$28,000. If you decide to take the $115,000 contract with the liquidated damages clause, your "average" profit will be $28,000.Answer contract with clause, expected profit $28,000.

NEW QUESTION: 2
Firekiller 2000 is an example of a __________.
A. Security software disabler Trojan
B. DoS attack Trojan
C. Remote access Trojan
D. Data sending Trojan
Answer: A

NEW QUESTION: 3
To successfully implement a multiple-site pickup of parts from different suppliers, it is necessary that:
A. suppliers be located close to their customers' sites.
B. customers use contract carriers.
C. electronic data interchange be used.
D. suppliers have their products ready at specified times.
Answer: D

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