When two or more independent firms establish a new firm together it is an example of Quizlet
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Terms in this set (519)Sets with similar termsOther sets by this creatorVerified questionsQUESTION In late 1980, the U.S. Commerce Department released new data showing inflation was 15%. At the time, the prime rate of interest was 21%, a record high. However, many investors expected the new Reagan administration to be more effective in controlling inflation than the Carter administration had been. Moreover, many observers believed that the extremely high interest rates and generally tight credit, which resulted from the Federal Reserve System’s attempts to curb the inflation rate, would lead to a recession, which, in turn, would lead to a decline in inflation and interest rates. Assume that, at the beginning of 1981, the expected inflation rate for 1981 was 13%; for 1982, 9%; for 1983, 7%; and for 1984 and thereafter, 6%. a. What was the average expected inflation rate over the 5-year period 1981–1985? (Use the arithmetic average.) b. Over the 5-year period, what average nominal interest rate would be expected to produce a 2% real risk-free return on 5-year Treasury securities? Assume MRP=0. c. Assuming a real risk-free rate of 2% and a maturity risk premium that equals $0.1 \times(t) \%$, where t is the number of years to maturity, estimate the interest rate in January 1981 on bonds that mature in 1, 2, 5, 10, and 20 years. Draw a yield curve based on these data. d. Describe the general economic conditions that could lead to an upward-sloping yield curve. e. If investors in early 1981 expected the inflation rate for every future year to be 10% (i.e., $\mathrm{I}_{\mathrm{t}}=\mathrm{I}_{\mathrm{t}+1}=10 \%$ for t=1 to $\infty)$, what would the yield curve have looked like? Consider all the factors that are likely to affect the curve. Does your answer here make you question the yield curve you drew in part c? Verified answer Recommended textbook solutions
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Mathematics with Business Applications6th EditionMcGraw-Hill Education 3,760 solutions A strategic alliance exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services. The three broad categories of alliances include nonequity alliances, joint ventures and equity alliances. In a nonequity alliance, cooperating firms agree to work together to develop, manufacture, or sell products or services, but they do not take equity positions in each other or form an independent organizational unit to manage their cooperative efforts. Rather, these cooperative relations are managed through the use of various forms of contracts. In an equity alliance, cooperating firms supplement contracts with equity holdings in alliance partners. In a joint venture, cooperating firms create a legally independent firm in which they invest and from which they share any profits that are created. Firms go it alone when
they attempt to develop all the resources and capabilities they need to exploit market opportunities and neutralize market threats by themselves. Sometimes, going it alone can create the same, or even more, value than using alliances to exploit opportunities and neutralize threats. In these settings, going it alone is a substitute for a strategic alliance. However, in other settings, using an alliance can create substantially more value than going it alone. In these settings, going it alone is
not a substitute for a strategic alliance. In general, alliances will be preferred to going it alone when The five tools firms can use to reduce the threat of cheating in strategic alliances
are contracts, equity investments, firm reputations, joint ventures, and trust. Other sets by this creatorWhen two or more independent firms establish a new firm together it is an example of?A joint venture is an agreement by two or more people or companies to accomplish a specific business goal together. A joint venture can be structured as a separate business entity or simply grow out of a contract between the parties.
What type of strategic alliance involves two or more firms creating and together owning a new independent organization?Explanation: A joint venture is a form of alliance in which two or more organizations, which are interrelated to each other either vertically or horizontally, make an agreement of collusion between them.
When firms create a legally independent firm in which they invest and share profits?In a joint venture, cooperating firms create a legally independent firm in which they invest and from which they share any profits that are created.
When two or more firms unite but remain independent?A strategic alliance is an arrangement between two companies to undertake a mutually beneficial project while each retains its independence. The agreement is less complex and less binding than a joint venture, in which two businesses pool resources to create a separate business entity.
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