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Long Term Investment
ECO 550 Assignment 3:
Name of student
Professor Name
Course Name
Date

Introduction
For any company one of the essentially significant long term decisions relates to
investment
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Typically investment engages using financial resources to procure a
building/ machine or other asset, which will subsequently yield returns to a business beyond an
era of time
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These issues will diverge with
reference to your particular circumstances, age, and approach to risk, and thinking as regards
them cautiously prior to you set up making commitments will assist you keeping away from
several potentially expensive mistakes
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Outline of a plan
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It is their perceptive and choices which determines the success of
any business in long term
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In
contrast, prior to we elucidate the strategies to build low-calorie microwavable food inelastic, we
have got to realize the significance of elasticity
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It is determined as the percentage of the proportional change in the demanded quantity

and proportional change in price
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Inelasticity essentially involve that the product is essential to the
consumer, as a result even if the price goes up, customer will not act in response with an equiproportionate reduction in demanded quantity
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61 which denotes a 1% price increase of the product sources demanded
quantity to increase by 0
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Consequently, the product demand is comparatively inelastic
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[ M
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]
So the primary strategy will be to classify the section of the consumer for which product
of low calorie microwavable is essential and center on tendering services and benefits to these
sections which tie up them to the product for an long period of time
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Cost Reduction will additionally assist the company
through which they can surpass on the gain of reducing the cost by maintaining the price low and
thus maintaining the base of customers
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2
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Policies from more than a few levels in an economy can
have an effect on the business
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At State level, regulations includes licensing of various businesses and
regulation of public utility companies, for instance health care facilities, and abundant
professions, for instance law and accounting
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Correspondingly, local governments normally set and put into effect building codes and zoning
laws
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These restraints can have an effect on a capital costs, operating costs of
firm (both variable and fixed), and revenues
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There are more than a few firms in this case of the microwavable food, who are
producing food which are to some extent diverse from each other, a situation that can be
exemplified as differentiation of product
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Now as per to FDA, it is needed that the stated quantity for an substitute or
imitation food or altered food, for instance a version of low calorie, should be the identical for

the foodstuff for which it is proposed as a replacement
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3
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Industry of Low- calorie microwavable food has been exemplified as industry of
monopolistic competition
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One
extensively used index of market concentration is the ratio of market concentration
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Companies that stand-in alone can be controlled beneath the Sherman Act who are unlawfully
endeavoring to monopolize a market or employ in monopolistic practices
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Similarly equality can be infringed when the industry performs discrimination of prices
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Differential pricing directly to final product customers is permitted (and
frequently based on “what the market will stand”) however not so in pricing to transitional
product resellers (distributors, wholesalers, etc
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Major reasons for government involvement
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Regulations turn out to be pleasing if the intervention effects into marginal benefit further than
the intervention marginal cost
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Again, one
more important feature is deliberation of ensuring fairness or equity in the process of decision
making
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It is supposed that unregulated market can for times lead to inefficiency or as normally
referred to as failures of market
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In such circumstances a normal monopoly can offer the services mainly
efficiently, however that would generate unregulated profits and market power
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Correspondingly, there might be substantial differences in terms of social costs and
values and private costs and values from the manufacture and using up of definite goods and
services
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One instance of unconstructive
externality is pollution of environment and in such a situation regulatory provisions similar to
carbon tax can here contribute a significant role in harmonizing the negative effects of pollution
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The major complexities under expansion via capital projects
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Therefore it is best that firm’s managers think of the extensive run and
allocate resources to raise productive capacity, generate mechanism to advance cost efficiency,
and expand the base of asset of the company
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Capital budgeting is a
procedure that engages long term planning, needs appropriate mechanism to assess capital
expenditures which fundamentally demands developments and, research training and education
for employee, -buy versus lease- decisions, and decisions concerning acquisitions and mergers
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Slack, & M
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]
6
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The complexities engaged in expansion and capital budgeting require cautious and
deliberated efforts and the subsequent steps might be taken consecutively to tackle these
complexities
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Participation of all the stakeholders in producing fresh ideas, from factory workers
all the means up to the Board of directors, will surely assist in sinking the complexities
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And following
principles can positively aid in estimating such cash flows;

1
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e
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[ M
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, Bragg, (2012)
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Cash flows must be calculated on basis of after-tax, by means of the firm’s marginal tax rate
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All the indirect outcomes of the project all through the firm must be comprised in the
calculations of cash-flow
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[ M
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, Bragg,
(2012)
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Sunk costs must not be considered when estimating the project
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Since sunk costs cannot be evaded, they
must not be deemed in the decision to reject or accept a project
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The worth of resources employed in the project must be measured in expressions of their
opportunity costs
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Classically, a project
will effect in an initial (first-year) outflow (investment) pursued by a sequence of cash inflows
(returns) above a number of following years and there might be more than a few criterion to
evaluate the viability of a project: be it Net Present value Internal or rate of return
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7
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It is relatively normal to have a conflict of interest amongst the shareholders and
managers
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The foremost trouble comes from the allocation of
profit amongst the shareholders and managers
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8
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One strategy would be to
propose deferred stockiis to the managers which enable the holder to acquire company stock at a
small discount to its existing price
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If the performance of firm’s consequently improves, capitalized value
ascends and equally the managers and shareholders position to gain
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There is an extensive selection of financial
instruments and asset classes to select from, and it falls to the individual investor to recognize the
risks by reading the documentation, doing their homework, etc… prior to making any decisions

on investment
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Make balanced decisions founded on your original goals
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Yet it’s rather several people find
astonishingly hard to do every time in practice
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N
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Principles of Microeconomics (6th ed
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R
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C
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H
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Harris, (2014)
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Stamford, CT: Cengage Learning

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Lewis, (2003)
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M
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, Bragg, (2012)
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(2nd Ed
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

M
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Economic Theory in Retrospect, 4th edition

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