A chemical company is in the process of studying two long-term plans.The first plan involves expansion of their industrial division.The second plan emphasizes expansion in the business of consumer pharmaceuticals.Market research reveals the following (preliminary)results (returns are in $ millions):
The planning committee has the (risk averse)utility function U = 10M - 0.05M2.Discuss the long-term planning decision based on the preliminary predictions and the given utility function:
Definitions:
Finance Charges
The cost of borrowing money, including interest and other fees.
Accounts Receivable Turnover
A financial ratio that measures how effectively a company collects cash from its credit sales by comparing net credit sales with the average accounts receivable.
Average Collection Period
The average amount of time it takes for a business to receive payments owed by its customers for goods or services sold on credit.
Net Sales
The total revenue from sales of goods or services, less returns, allowances for damaged or missing goods, and discounts.
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