Question 2
Read the Company Case - Porsche: Guarding the Old While Bringing in the New. Develop a three-page, APA-style paper on the following Questions for Discussion: 1. Analyze the buyer decision process of a typical Porsche customer. 2. Contrast the traditional Porsche customer decision process to the decision process for a Cayenne or a Panamera customer. 3. Which concepts from the chapter explain why Porsche sold so many lower-priced models in the 1970s and 1980s? 4. Explain how both positive and negative consumer attitudes toward a brand like Porsche develop. How might Porsche change consumer attitudes towards the brand? 5. What role does the Porsche brand play in the self-concept of its buyers? COMPANY Case: Porsche: Guarding the Old While Bringing in the New Porsche (pronounced Porsh-uh) is a unique company. It has always been a niche brand that makes cars for a small and distinctive segment of automobile buyers. In 2009, Porsche sold only 27,717 cars in the five models it sells in the United States. Honda sold about 10 times that many Accords alone. But Porsche owners are as rare as their vehicles. For that reason, top managers at Porsche spend a great deal of time thinking about customers. They want to know who their customers are, what they think, and how they feel. They want to know why they buy a Porsche rather then a Jaguar, a Ferrari, or a big Mercedes coupe. These are challenging questions to answer; even Porsche owners themselves don?t know exactly what motivates their buying. But given Porsche?s low volume and the increasingly fragmented auto market, it is imperative that management understands its customers and what gets their motors running. THE PROFILE OF A PORSCHE OWNER Porsche was founded in 1931 by Ferdinand Porsche, the man credited for designing the original Volkswagen Beetle?Adolf Hitler?s ?people?s car? and one of the most successful car designs of all time. For most of its first two decades, the company built Volkswagen Beetles for German citizens and tanks and Beetles for the military. As Porsche AG began to sell cars under its own nameplate in the 1950s and 1960s, a few constants developed. The company sold very few models, creating an image of exclusivity. Those models had a rounded, bubble shape that had its roots in the original Beetle but evolved into something more Porsche-like with the world famous 356 and 911 models. Finally, Porsche?s automobiles featured air-cooled four- and six-cylinder ?boxer? motors (cylinders in an opposed configuration) in the rear of the car. This gave the cars a unique and often dangerous characteristic?a tendency for the rear end to swing out when cornering hard. That?s one of the reasons that Porsche owners were drawn to them. They were challenging to drive, which kept most people away. Since its early days, Porsche has appealed to a very narrow segment of financially successful people. These are achievers who see themselves as entrepreneurial, even if they work for a corporation. They set very high goals for themselves and then work doggedly to meet them. And they expect no less from the clothes they wear, the restaurants they go to, or the cars they drive. These individuals see themselves not as a part of the regular world but as exceptions to it. They buy Porsches because the car mirrors their self-image; it stands for the things owners like to see in themselves and their lives. Most of us buy what Porsche executives call utility vehicles. That is, we buy cars primarily to go to work, transport children, and run errands. Because we use our cars to accomplish these daily tasks, we base buying decisions on features such as price, size, fuel economy, and other practical considerations. But Porsche is more than a utility car. Its owners see it as a car to be enjoyed, not just used. Most Porsche buyers are not moved by information but by feelings. A Porsche is like a piece of clothing?something the owner ?wears? and is seen in. They develop a personal relationship with their cars, one that has more to do with the way the car sounds, vibrates, and feels, rather than the how many cup holders it has or how much cargo it can hold in the trunk. They admire their Porsche because it is a competent performance machine without being flashy or phony. People buy Porsches because they enjoy driving. If all they needed was something to get them from point A to point B, they could find something much less expensive. And while many Porsche owners are car enthusiasts, some of them are not. One successful businesswoman and owner of a high-end Porsche said, ?When I drive this car to the high school to pick up my daughter, I end up with five youngsters in the car. If I drive any other car, I can?t even find her; she doesn?t want to come home.? FROM NICHE TO NUMEROUS For its first few decades, Porsche AG lived by the philosophy of Ferry Porsche, Ferdinand?s son. Ferry created the Porsche 356 because no one else made a car like he wanted. ?We did no market research, we had no sales forecasts, no return-on-investment calculations. None of that. I very simply built my dream car and figured that there would be other people who share that dream.? So, really, Porsche AG from the beginning was very much like its customers: an achiever that set out to make the very best. But as the years rolled on, Porsche management became concerned with a significant issue: Were there enough Porsche buyers to keep the company afloat? Granted, the company never had illusions of churning out the numbers of a Chevrolet or a Toyota. But to fund innovation, even a niche manufacturer has to grow a little. And Porsche began to worry that the quirky nature of the people who buy Porsches might just run out on them. This led Porsche to extend its brand outside the box. In the early 1970s, Porsche introduced the 914, a square-ish, mid-engine, two-seater that was much cheaper than the 911. This meant that a different class of people could afford a Porsche. It was no surprise that the 914 became Porsche?s top selling model. By the late 1970s, Porsche replaced the 914 with a hatchback coupe that had something no other regular Porsche model had ever had: an engine in the front. At less than $20,000, more than $10,000 less than the 911, the 924 and later 944 models were once again Porsche?s pitch to affordability. At one point, Porsche increased its sales goal by nearly 50 percent to 60,000 cars a year. Although these cars were in many respects sales successes, the Porsche faithful cried foul. They considered these entry-level models to be cheap and underperforming. Most loyalists never really accepted these models as ?real? Porsches. In fact, they were not at all happy that they had to share their brand with a customer who didn?t fit the Porsche owner profile. They were turned off by what they saw as a corporate strategy that had focused on mass over class marketing. This tarnished image was compounded by the fact that Nissan, Toyota, BMW, and other car manufacturers had ramped up high-end sports car offerings, creating some fierce competition. In fact, both the Datsun 280-ZX and the Toyota Supra were not only cheaper than Porsche?s 944 but also faster. A struggling economy threw more sand in Porsche?s tank. By 1990, Porsche sales had plummeted, and the company flirted with bankruptcy. RETURN TO ITS ROOTS? But Porsche wasn?t going down without a fight. It quickly recognized the error of its ways and halted production of the entry-level models. It rebuilt its damaged image by revamping its higher-end model lines with more race-bred technology. In an effort to regain rapport with customers, Porsche once again targeted the high end of the market in both price and performance. It set modest sales goals and decided that moderate growth with higher margins would be more profitable in the long term. Thus, the company set out to make one less Porsche than the public demanded. According to one executive, ?We?re not looking for volume; we?re searching for exclusivity.? Porsche?s efforts had the desired effect. By the late 1990s, the brand was once again favored by the same type of achiever who had so deeply loved the car for decades. The cars were once again exclusive. And the company was once again profitable. But by the early 2000s, Porsche management was again asking itself a familiar question: To have a sustainable future, could Porsche rely on only the Porsche faithful? According to then CEO Wendelin Wiedeking, ?For Porsche to remain independent, it can?t be dependent on the most fickle segment in the market. We don?t want to become just a marketing department of some giant. We have to make sure we?re profitable enough to pay for future development ourselves.? So in 2002, Porsche did the unthinkable. It became one of the last car companies to jump into the insatiable sport utility vehicle (SUV) market. At roughly 5,000 pounds, the new Porsche Cayenne was heavier than anything that Porsche had ever made, with the exception of some prototype tanks it made during WWII. Once again, the new model featured an engine up front. And it was the first Porsche to ever be equipped with seatbelts for five. As news spread about the car?s development, howls could be heard from Porsche?s customer base. But this time, Porsche did not seem too concerned that the loyalists would be put off. Could it be that the company had already forgotten what happened the last time it deviated from the mold? After driving one of the first Cayenne?s off the assembly line, one journalist stated, ?A day at the wheel of the 444 horsepower Cayenne Turbo leaves two overwhelming impressions. First, the Cayenne doesn?t behave or feel like an SUV, and second, it drives like a Porsche.? This was no entry-level car. Porsche had created a two-and-a-half ton beast that could accelerate to 60 miles per hour in just over five seconds, corner like it was on rails, and hit 165 miles per hour, all while coddling five adults in sumptuous leather seats with almost no wind noise from the outside world. On top of that, it could keep up with a Land Rover when the pavement ended. Indeed, Porsche had created the Porsche of SUVs. Last year, Porsche upped the ante one more time. It unveiled another large vehicle. But this time, it was a low-slung, five-door luxury sedan. The Porsche faithful and the automotive press again gasped in disbelief. But by the time the Panamera hit the pavement, Porsche had proven once again that Porsche customers could have their cake and eat it to. The Panamera is almost as big as the Cayenne but can move four adults down the road at speeds of up to 188 miles per hour and accelerate from a standstill to 60 miles per hour in four seconds flat. Although some Porsche traditionalists would never be caught dead driving a front engine Porsche that has more than two doors, Porsche insists that two trends will sustain these new models. First, a category of Porsche buyers has moved into life stages that have them facing inescapable needs; they need to haul more people and stuff. This not only applies to certain regular Porsche buyers, but Porsche is again seeing buyers enter its dealerships that otherwise wouldn?t have. Only this time, the price points of the new vehicles are drawing only the well heeled, allowing Porsche to maintain its exclusivity. These buyers also seem to fit the achiever profile of regular Porsche buyers. The second trend is the growth of emerging economies. Whereas the United States has long been the world?s biggest consumer of Porsches, the company expects China to become its biggest customer before too long. Twenty years ago, the United States accounted for about 50 percent of Porsche?s worldwide sales. Now, it accounts for only about 26 percent. In China, many people who can afford to buy a car as expensive as a Porsche also hire a chauffeur. The Cayenne and the Panamera are perfect for those who want to be driven around in style but who may also want to make a quick getaway if necessary. The most recent economic downturn has brought down the sales of just about every maker of premium automobiles. When times are tough, buying a car like a Porsche is the ultimate deferrable purchase. But as this downturn turns back up, Porsche is better poised than it has ever been to meet the needs of its customer base. It is also in better shape than ever to maintain its brand image with the Porsche faithful and with others as well. Sure, understanding Porsche buyers is still a difficult task. But a former CEO of Porsche summed it up this way: ?If you really want to understand our customers, you have to understand the phrase, ?If I were going to be a car, I?d be a Porsche.?? (Principles of Marketing for Ashford University, 14th Edition. Pearson Learning Solutions pp. 162 - 163).
Question 3
____ 15. A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 13.9%, what is the stock price? a. $11.04 b. $12.40 c. $13.76 d. $15.00 e. $9.42 ____ 16. If D = $1.75, g (which is constant) = 3.6%, and P = $31.00, what is the stock?s expected total return for the coming year? a. 7.75% b. 9.45% c. 10.49% d. 10.87% e. 9.64% ____ 17. Whited Inc.'s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.50% per year. The required rate of return on the stock, r , is 11.50%. What is the stock's expected price 5 years from now? a. $43.93 b. $51.40 c. $52.27 d. $35.58 e. $53.59 ____ 18. Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $2.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell? a. $38.46 b. $46.54 c. $44.23 d. $41.54 e. $30.00 ____ 19. The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price? a. $22.83 b. $27.99 c. $27.17 d. $22.01 e. $24.18 ____ 20. Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC)for use in capital budgeting? a. Long-term debt. b. Accounts payable. c. Retained earnings. d. Common stock. e. Preferred stock. ____ 21. Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A?s cost of capital is 10.0%, Division B?s cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A?s projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept? a. A Division B project with a 13% return. b. A Division B project with a 12% return. c. A Division A project with an 11% return. d. A Division A project with a 9% return. e. A Division B project with an 11% return. ____ 22. Bosio Inc.'s perpetual preferred stock sells for $75.00 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC? a. 10.39% b. 13.93% c. 14.40% d. 14.28% e. 11.81% ____ 23. Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 1.15. Based on the CAPM approach, what is the cost of equity from retained earnings? a. 7.60% b. 8.62% c. 12.67% d. 12.27% e. 10.14% ____ 24. You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 13.00%. The firm will not be issuing any new stock. What is its WACC? a. 9.38% b. 11.44% c. 9.19% d. 7.22% e. 10.22% ____ 25. You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 13.25%, and the tax rate is 40%. The firm will not be issuing any new stock. What is Quigley's WACC? a. 11.20% b. 9.99% c. 9.16% d. 9.25% e. 9.44%
Question 4
Please see P13-4A HW attached.,P13-4A Glaser Services acquired 30% of the outstanding common stock of Nickels Company on January 1, 2008, by paying $800,000 for the 45,000 shares. Nickels declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2008. Nickels reported net income of $320,000 for the year. At December 31, 2008, the market price of Nickels common stock was $24 per share. Incorrect. Prepare the journal entries for Glaser Services for 2008 assuming Glaser cannot exercise significant influence over Nickels. (Use the cost method and assume that Nickels common stock should be classified as a trading security.) Date Account / Description Debit Credit Jan.1 Stock investments $ 800000 Cash $ 800000 Mar. 15 Cash $ 13500 Dividend revenue $ 13500 June 15 Cash $ 13500 Dividend revenue $ 13500 Sept. 15 Cash $ 13500 Dividend revenue $ 13500 Dec. 15 Cash $ 13500 Dividend revenue $ 13500 Dec. 31 $ 280000 $ 280000 Incorrect. Prepare the journal entries for Glaser Services for 2008, assuming Glaser can exercise significant influence over Nickels. Use the equity method. Date Account / Description Debit Credit Jan.1 $ 800000 Cash $ 800000 Mar. 15 Cash $ 13500 Stock investments $ 13500 June 15 Cash $ 13500 Stock investments $ 13500 Sept. 15 Cash $ 13500 Stock investments $ 13500 Dec. 15 Cash $ 13500 Stock investments $ 13500 Dec. 31 Stock investments $ 96000 $ 96000 Correct. In tabular form, indicate the investment and income statement account balances at December 31, 2008, under each method of accounting. (If answer is zero, please enter 0. Do not leave any fields blank.) Cost Method Equity Method Stock Investments Common Stock $ 1080000 $ 842000 Unrealized gain-Income 280000 0 Dividend revenue 54000 0 Revenue from investment in Nickels 0 96000,Need account for those in yellow
Question 5
Multiple Choice 1. Convenience sampling is an example of a. probabilistic sampling b. stratified sampling c. nonprobabilistic sampling d. cluster sampling 2. Cluster sampling is a. a nonprobability sampling method b. the same as convenience sampling c. a probability sampling method d. None of these alternatives is correct. 3. The closer the sample mean is to the population mean, a. the larger the sampling error b. the smaller the sampling error c. the sampling error equals 1 d. None of these alternatives is correct. 4. Since the sample size is always smaller than the size of the population, the sample mean a. must always be smaller than the population mean b. must be larger than the population mean c. must be equal to the population mean d. can be smaller, larger, or equal to the population mean 5. As the sample size increases, the a. standard deviation of the population decreases b. population mean increases c. standard error of the mean decreases d. standard error of the mean increases 6. A simple random sample from an infinite population is a sample selected such that a. each element is selected independently and from the same population b. each element has a 0.5 probability of being selected c. each element has a probability of at least 0.5 of being selected d. the probability of being selected changes 7. If we consider the simple random sampling process as an experiment, the sample mean is a. always zero b. always smaller than the population mean c. a random variable d. exactly equal to the population mean 8. A population has a mean of 75 and a standard deviation of 8. A random sample of 800 is selected. The expected value of x(bar) is a. 8 b. 75 c. 800 d. None of these alternatives is correct. 9. As the sample size becomes larger, the sampling distribution of the sample mean approaches a a. binomial distribution b. Poisson distribution c. normal distribution d. chi-square distribution 10. The purpose of statistical inference is to provide information about the a. sample based upon information contained in the population b. population based upon information contained in the sample c. population based upon information contained in the population d. mean of the sample based upon the mean of the population 11. A simple random sample of 64 observations was taken from a large population. The sample mean and the standard deviation were determined to be 320 and 120 respectively. The standard error of the mean is a. 1.875 b. 40 c. 5 d. 15 12. A population has a mean of 80 and a standard deviation of 7. A sample of 49 observations will be taken. The probability that the sample mean will be larger than 82 is a. 0.5228 b. 0.9772 c. 0.0228 d. 0.4772 13. There are 7 children in a family. The number of children defines a population. The number of simple random samples of size 2 (without replacement) which are possible equals a. 12 b. 15 c. 3 d. 21 14. Four hundred people were asked whether gun laws should be more stringent. Three hundred said "yes," and 100 said "no." The point estimate of the proportion in the population who will respond "yes" is a. 300 b. approximately 300 c. 0.75 d. 0.25 15. The sampling distribution of the sample means a. is the probability distribution showing all possible values of the sample mean b. is used as a point estimator of the population mean ? c. is an unbiased estimator d. shows the distribution of all possible values of ? Problem 1 Business Week surveyed MBA alumni 10 years after graduation. One finding was that alumni spend an average of $115.50 per week eating out socially. You have been asked to conduct a follow-up study by taking a sample of 40 of these MBA alumni. Assume the population standard deviation is $35. 16. What is the standard error of the mean? (round to 2 decimals) 17. What is the probability that the sample mean will be within $10 of the population mean? (4 decimals) 18. Suppose you find a sample mean of $100. What is the probability of finding a sample mean of $100 or less? (4 decimals) 19. Would you consider this sample to be an unusually low spending group of alumni? a. Yes, given the probability found in the question above is relatively high. b. Yes, given the probability found in the question above is relatively low. c. No, given the probability found in the question above is relatively high. d. No, given the probability found in the question above is relatively low. Problem 2 Money magazine reported that the average price of a gallon of gasoline in the U.S. during the first quarter of 2001 was $1.46. Assume the price reported is the population mean and the population standard deviation is $0.15. 20. What is the probability that the mean price for a sample of 30 gas stations is within $0.03 of the population mean? (4 decimals) 21. What is the probability that the mean price for a sample of 50 gas stations is within $0.03 of the population mean? (4 decimals) 22. What is the probability that the mean price for a sample of 100 gas stations is within $0.03 of the population mean? (4 decimals) 23. Would you recommend a sample size of 30, 50, or 100 to have at least a .95 probability that t sample mean is within $0.03 of the population mean? (answer either 30, 50, or 100) Problem 3 The mean annual starting salary for marketing majors is $34,000. Assume the standard deviation for this population is $2,000. 24. What is the probability that a simple random sample of 30 marketing majors will have a sample mean within +/- $250 of the population mean? (4 decimals) 25. What is the probability that a simple random sample of 100 marketing majors will have a sample mean within +/- $250 of the population mean? (4 decimals) 26. What is the probability that a simple random sample of 400 marketing majors will have a sample mean within +/- $250 of the population mean? (4 decimals) 27. As the sample size increases a. the probability that the sample mean will be within a specified distance from the population mean increases. b. the probability that the sample mean will be within a specified distance from the population mean decreases. c. the probability that the sample mean will be within a specified distance from the population mean does not change. d. None of the above are correct. Problem 4 (from second half of chapter 6) The average amount parents and children spent per child on back-to-school clothes in Fall 2001 was $527. Assume the standard deviation is $160 and that the amount spent is normally distributed. 28. What is the probability that the amount spent on a randomly selected child is more than $700? (4 decimals) 29. What is the probability that the amount spent on a randomly selected child is less than $100? (4 decimals) 30. What is the probability that the amount spent on a randomly selected child is between $450 and $700? (4 decimals) 31. What is the probability that the amount spent on a randomly selected child is no more than $300? (4 decimals)
