Blossom's Flowers Purchases Roses for Sale for Valentine's Day

question 16

Multiple Choice

Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.4 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal EMV for buying roses is

• A)$700
• B)$900
• C)$1,700
• D)$1,900

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Definitions:

Present Value

Today's monetary value of a forthcoming sum or series of cash flows, after considering a specified rate of return.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in discounting to account for the time value of money.

Future Cash Receipts

Expected incoming cash flows from business operations, investments, or other sources.

Callable Bonds

Securities that the issuer has the right to repurchase before they reach their due date, for a predefined amount.