BA 101 1st Edition Lecture 15 Outline of Last Lecture 1. Break Even analysis2. Net Present Value3. Marketing strategy Outline of Current Lecture I. Break Even and Net Present Value ReviewII. Business LawCurrent LectureI. Break Even and Net Present Value Review:Break Even Analysis: Definition: the break-even is the point at which the sales and costs are equal. Profit iszero at this point. “The business has broken even” -Or- the break-even point answersthe question “how many units do you have to sell to cover all of your costs?”(Break-even units = fixed costs over price – variable costs per unit – or – contribution margin over units)Advantages of Break-Even Analysis: - Quick assessment of potential for a business or a new product- It identifies a finite targetDisadvantages: - Assumes that all products are sold at the same price- Doesn’t specify a time frame- Does not consider the net present value of money Net Present Value (NPV): this concept answers the question “is it better to have one million dollars today, or $100,000 every year for the next ten years?” The answer is in the difference between the present value of cash inflows and the perceived value of cash outflows. It would be better to have one million dollars today because you could invest or otherwise use it to make more money, while the $100,000 dollars would be worth less down the line because of inflation. These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.NPV is used to: analyze the current value of an investment or project. It compares the value of a dollar today to the value of the same dollar in the future, taking into account inflation and dollar returns. Inflation and dollar returns are opposing forces. If a project’s NPV is positive, it should generally be accepted, if it’s negative it should be rejected. II. Business Law:The legal and regulatory environment that businesses operate in.Contracts: Legally enforceable agreements between two or more parties. Contracts consist of an offer, acceptance, and consideration. They don’t have to be written to be enforceableContractual Capacity: To be a legal contract, the parties must have a legal ability to enter into the contract. They have to be of age, mentally sound, and not coerced. Private Enterprise: The market turns self-interest into social good, and to work the system needs private property, the right to keep profit, fair competition, and freedom of choice. The Role of Government: - To ensure fair competition, private property, freedom of choice, and right to keepprofit- To promote economic health and social responsibility- To correct market failures and ethical lapsesHow does the government intervene? Through legal channels. Problems with Businesses: - The power of business vs consumers- The actions of businesses vs consumers- Public reaction (businesses have a lot of social power)- The reaction of the government (businesses have a lot of political power)Tort: a civil wrong inflicted on other people or their property- Form of negligence - Torts include all wrongs that are not a breach of contract- Includes: assault, fraud, slander.Fraud: form of tort where someone hurts another through deception or manipulationAlternative dispute resolution: Arbitration, binding and non-binding and mediation (always non-binding)Types of Property: - Real: real estate and everything permanently attached to it- Personal: every other material item- Intellectual: property generated by a person’s creative activities3 Types of Intellectual Property:- Patent: inventors get exclusive rights to inventions- Copyright: Authors have exclusive rights to documents- Trademark: symbols used by firms to identify productsBankruptcy: The primary purposes of the law of bankruptcy are to give an honest debtor a “fresh start” in life by relieving the debtor of most debts, and to repay creditors in an orderly manner to the extent that the debtor has property available for payment. Legal nonpayment of financial obligation:- Liquidation and erasure of debt - Restructure and repayment plans for