Question 1
For this assignment you will have to accept the following three assumptions. (You do not have to agree with them but you will need to accept them in order to respond to this assignment) 1. Employee behavior is the most important factor in organizational success. 2. It is management?s responsibility for guiding/directing individual behavior so that each employee makes a maximum contribution to the success of the organization. 3. To be successful in guiding employee behavior, a manager must know and understand their employee?s well enough so they can make a clear assessment of WHY they behave as they do? 4. Using his/her understanding of human behavior (specifically his/her employees) .can significantly improve his/her ability to predict how specific employees will respond/react in a given situation, thus increasing their ability to focus on improving employee?s contribution to organizational success. Identify two people (imaginary employees) and as much as possible, each one should be different in personality, attitudes, work values, etc. As you describe them, give special attention to factors in Myers-Briggs types, Big Five personality factors and Holland?s topologies. (Assumptions 1 & 3) NOW, you?re the manager. You have just been given a HUGE assignment. The project could impact your future with the company and will definitely impact the ?bottom line? for the next year or so. The project will place lots of stress on you and your staff. There will be lots of extra work, long hours (sometimes weekends), working in teams and doing tasks that were not previously a part of their job. Based on your knowledge of the two people you described above and your study of the material in this assignment, state how you ?predict? each of the two will respond. (Assumption 2) Second, assuming your predicted behavior is not what you desire; describe your approach to each of the two people to generate the expected/desired behavior. (Assumption 4)
Question 2
Checklist Part 2: The 7 slide PowerPoint presentation (this includes a title and reference slide): ? Analyze customer service tools to service to small clients in an economical manner (submit as a PowerPoint). Place three to four bulleted points on each slide Put additional notes in the Notes section of the slide. See the quick step-by-step PPT tutorial in the course. Directions for Submitting Your Assignment: Before you submit your 2-part Assignment, you should save your work on your computer in a location and with names that you will remember. Make sure your Assignment is in Microsoft Word format and MS PowerPoint Complete the two-part Final Project by downloading the Final Project instructions below (PDF). Review the ?APA Simply Stated? PPT presentation as a supplement to the instructions as well. ------------------------------------------------------------------------------------------------------------------- Current Service Plan at OTTP Provide all customers, regardless on the amount of their purchase, frequency of purchase or dollar amount spent per year the same special attention. Our theory at OTTP is that a customer who makes a small purchase today might make a large purchase tomorrow. All our customers receive the same price, convenience and service. Proposed Tiered Service Plan: Mr. MacGibson?s basic thought is to reward their B2B customers who give On-Time Technology Products $100,000 worth of business an end-of-year ?thank you payment? that reflects a 5 percent discount on all yearly purchases. In addition, those customers would receive a commitment to nextday turnaround time on the resolution of all customer service problems. Moreover, the customers who purchase $500,000 or more annually would receive a 10 percent discount and free delivery. The average B2B sale is $25,000.
Question 3
Page 1 1. (TCO B) Which of the following statements concerning the MM extension with growth is NOT CORRECT? (a) The tax shields should be discounted at the unlevered cost of equity. (b) The value of a growing tax shield is greater than the value of a constant tax shield. (c) For a given D/S, the levered cost of equity is greater than the levered cost of equity under MM's original (with tax) assumptions. (d) For a given D/S, the WACC is greater than the WACC under MM's original (with tax) assumptions. (e) The total value of the firm is independent of the amount of debt it uses. (Points : 20) 2. (TCO D) Which of the following is generally NOT true and an advantage of going public? (a) Facilitates stockholder diversification. (b) Increases the liquidity of the firm's stock. (c) Makes it easier to obtain new equity capital. (d) Establishes a market value for the firm. (e) Makes it easier for owner-managers to engage in profitable self-dealings. (Points : 20) 3. (TCO E) Buster's Beverages is negotiating a lease on a new piece of equipment that would cost $100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for 3 years and then sold, because the firm plans to move to a new facility at that time. The estimated value of the equipment after 3 years is $30,000. If the borrow and Purchase Option is used, the cash flows would be the following: (Year 1) -2,400; (Year 2) -3,800; (Year 3) -1,400; (Year 4) -79,600; all of these cash outflows would be at the beginning of the respective years. Alternatively, the firm could lease the equipment for 3 years, with annual lease payments of $29,000 per year, payable at the beginning of each year. The firm is in the 20% tax bracket. If it borrows and purchases, it could obtain a 3-year simple interest loan, to purchase the equipment at a before-tax interest rate of 10%. If there is a positive Net Advantage to Leasing the firm will lease the equipment. Otherwise, it will buy it. What is the NAL? (a) $5,736 (b) $6,023 (c) $6,324 (d) $6,640 (e) $6,972 (Points : 20) 4. (TCO I) Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return. In the 90-day forward market, 1 British pound equals $1.65. If interest rate parity holds, what is the spot exchange rate? (a) 1 pound = $1.8000 (b) 1 pound = $1.6582 (c) 1 pound = $1.0000 (d) 1 pound = $0.8500 (e) 1 pound = $0.6031 (Points : 20) Page 2 1. (TCO C) D. Paul Inc. forecasts a capital budget of $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and it also wants to pay dividends of $500,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be? Net Income Payout (a) $898,750 55.63% (b) $943,688 58.41% (c) $990,872 61.43% (d) $1,040,415 64.40% (e) $1,092,436 67.62% (Points : 20) 2. (TCO F) Warren Corporation's stock sells for $42 per share. The company wants to sell some 20-year, annual interest, $1,000 par value bonds. Each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par? (a) 7.83% (b) 8.24% (c) 8.65% (d) 9.08% (e) 9.54% (Points : 20) 3. (TCO B) Reynolds Resorts is currently 100% equity financed. The CFO is considering a recapitalization plan under which the firm would issue long-term debt with a yield of 9% and use the proceeds to repurchase common stock. The recapitalization would not change the company's total assets, nor would it affect the firm's basic earning power, which is currently 15%. The CFO believes that this recapitalization would reduce the WACC and increase stock price. Which of the following would also be likely to occur if the company goes ahead with the recapitalization plan? (a) The company's net income would increase. (b) The company's earnings per share would decline. (c) The company's cost of equity would increase. (d) The company's ROA would increase. (e) The company's ROE would decline. (Points : 20) 4. (TCO G) Chapter 7 of the Bankruptcy Act is designed to do which of the following? (a) Protect shareholders against creditors. (b) Establish the rules of reorganization for firms with projected cash flows that eventually will be sufficient to meet debt payments. (c) Ensure that the firm is viable after emerging from bankruptcy. (d) Allow the firm to negotiate with each creditor individually. (e) Provide safeguards against the withdrawal of assets by the owners of the bankrupt firm and allow insolvent debtors to discharge all of their obligations and to start over unhampered by a burden of prior debt. (Points : 20) Page 3 1. (TCO I) If the spot rate of the Israeli shekel is 5.51 shekels per dollar and the 180-day forward rate is 5.97 shekels per dollar, then the forward rate for the Israeli shekel is selling at a _____ to the spot rate. (a) premium of 8% (b) premium of 18% (c) discount of 18% (d) discount of 8% (e) premium of 16% (Points : 20) 2. (TCO H) Which of the following statements about valuing a firm using the APV approach is most CORRECT? (a) The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity. (b) The value of equity is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity. (c) The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows before the horizon date at the unlevered cost of equity. (d) The value of equity is calculated by discounting the horizon value and the free cash flows at the cost of equity. (e) The APV approach stands for the accounting pre-valuation approach. (Points : 20) 3. (TCO A) Which of the following statements is CORRECT? (a) Put options give investors the right to buy a stock at a certain strike price before a specified date. (b) Call options give investors the right to sell a stock at a certain strike price before a specified date. (c) Options typically sell for less than their exercise value. (d) LEAPS are very short-term options that were created relatively recently and now trade in the market. (e) An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend. (Points : 20) 4. (TCO F) Which of the following statements is most CORRECT? (a) One advantage of forward contracts is that they are default free. (b) Futures contracts generally trade on an organized exchange and are marked to market daily. (c) Goods are never delivered under forward contracts, but are almost always delivered under futures contracts. (d) There are futures contracts for currencies but no forward contracts for currencies. (e) Futures contracts don't have any margin requirements but forward contracts do. (Points : 20)
Question 4
SCENARIO 2 As a member of the finance department in your company you are given the following annual budget by the production department for the production, sales and profits of a new product the Samson. The company is still to make its final decision on whether or not to produce the Samson. All units produced are presumed to be sold. Annual Production & sales units 130,000 $ $ Sales (130,000u x $27 per u) 3,510,000 Variable Costs Direct Material (130,000u x $0.20 per u) 26,000 Direct Labour (130,000u x $3.0 per u) 390,000 Variable overheads (130,000u x $4.50 per u) 585,000 (1,001,000) Fixed Costs Production costs 455,000 Factory Rent 308,500 Research & Development 1,600,000 (2,363,500) PROFIT 145,500 . The current budget for the Samson does not meet the company?s target profit policy for new products of $200,000 per annum. Market research has so far determined that the demand for Samson is elastic, such that an increase in price of $1.00 will lead to a fall in demand of 5,000 units. The research also found that there are two main rival products the Hercules and the Aphrodite which pursue ?market penetration pricing? of $30 and ?market skimming pricing? of $35 respectively. Task 2 You are required to design an appropriate spreadsheet model which will enable the budget to be analysed (using all the costs given) so that decisions on pricing and production can be made. To evidence your design you must present hard copies of: a) The spread sheet model showing ALL the formulae used b) A flexed budget showing the amount of units and selling price at the breakeven point c) A flexed budget showing the maximum profit that could be made assuming a maximum production and sales capacity to be determined by you. d) Any other flexed budget(s) which will be helpful to you in determining the price and amount of units of Samson to produce e) Advise the company of your choice of the price the Sampson should be sold at and how many units should be produced and sold in the coming year. [P 3.1] In order to achieve the merit 2 criteria in this assignment, you must a. Describe the relevant theories and techniques that have been applied in making your decisions in Task 2(e) and justify why these theories and techniques were used. Task 3 a) On a separate page, list eight (8) separate categories of users of accounts (decision makers) b) Explain which three of the categories of decision makers listed in (a) would need the information you provided in Tasks 2& 3. [P 2.3] SCENARIO 2 (continued) Upon viewing your work in Tasks 2&3 a Junior manager in the marketing department insists that the selling price of the Samson was wrongly computed given the following additional information: The Samson is a NEW product thus, the initial budget is for a ?one time? production run for only one year, after which its future will be reviewed. Fixed production costs and factory rent can be absorbed at $9.15 per unit and $6.15 per unit respectively The research and development cost represents amounts already spent on the Samson including market research and should NOT be relevant to a future decision. Five supervisors whose wages are included in Fixed production costs are to be taken from other departments to produce Samson for the upcoming year, and moving them would cause a loss in contribution of $260,000 during the production of the 130,000 units of Samson. The Junior manager suggests either an ?opportunity cost plus approach? should be used at the company?s usual mark up of 40% OR a ?marginal cost plus? approach should be used with a mark up of 250% as the initial production is only temporary. Task 4 Using the necessary information from Tasksabove, you are required to: a) Explain what ?relevant costs? are b) Explain how the ?Opportunity Cost Approach? to pricing is done and calculate this cost of the Samson c) Explain how ?Marginal cost plus? pricing is done and calculate this cost of the Samson d) Describe the advantages and disadvantages of the ?Opportunity Cost Approach? and ?Marginal cost plus? pricing, [P 3.2] In order to achieve the distinction3 criteria in this assignment, you must: Use information from the task above to explain if you agree or disagree with the Junior Manager [D 3]
Question 5
"1. On July 1, 2004, Risen Co. issued 500 of its 10%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, 2004 and mature on April 1, 2014. Interest is payable semiannually on April 1 and October 1. What amount did Risen receive from the bond issuance? a. $507,500 b. $500,000 c. $495,000 d. $482,500 2. On July 1, 2002, Moon, Inc. issued 9% bonds in the face amount of $2,000,000, which mature on July 1, 2012. The bonds were issued for $1,878,000 to yield 10%, resulting in a bond discount of $122,000. Moon uses the effective interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2004, Moon's unamortized bond discount should be a. $105,620. b. $102,000. c. $97,600. d. $86,000. 3. On January 1, 2004, Harry Co. redeemed its 15-year bonds of $1,500,000 par value for 102. They were originally issued on January 1, 1992 at 98 with a maturity date of January 1, 2007. The bond issue costs relating to this transaction were $90,000. Harry amortizes discounts, premiums, and bond issue costs using the straight-line method. What amount of loss should Harry recognize on the redemption of these bonds (ignore taxes)? a. $54,000 b. $36,000 c. $30,000 d. $0 4. A corporation was organized in January 2004 with authorized capital of $10 par value common stock. On February 1, 2004, shares were issued at par for cash. On March 1, 2004, the corporation's attorney accepted 7,000 shares of common stock in settlement for legal services with a fair value of $90,000. Additional paid-in capital would increase on February 1, 2004 March 1, 2004 a. Yes No b. Yes Yes c. No No d. No Yes 5. At its date of incorporation, Wilson, Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During the current year, Wilson acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method. Subsequently, these shares were reissued at a price of $12 per share. There have been no other issuances or acquisitions of its own common stock. What effect does the reissuance of the stock have on the following accounts? Retained Earnings Additional Paid-in Capital a. Decrease Decrease b. No effect Decrease c. Decrease No effect d. No effect No effect 6. On May 1, 2004 Lett Corp. declared and issued a 15% common stock dividend. Prior to this dividend, Lett had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of Lett's common stock was $20 per share on May 1, 2004. As a result of this stock dividend, Lett's total stockholders' equity a. increased by $300,000. b. decreased by $300,000. c. decreased by $15,000. d. did not change. 7. On January 1, 2004, Cater Corp. granted an employee an option to purchase 10,000 shares of Cater's $5 par value common stock at $20 per share. The Black-Scholes option pricing model determines total compensation expense to be $220,000. The option became exercisable on December 31, 2005, after the employee completed two years of service. The market prices of Cater's stock were as follows: January 1, 2004 $30 December 31, 2005 50 For 2005, Cater should recognize compensation expense under the fair value method of a. $150,000. b. $50,000. c. $110,000. d. $0. 8. At December 31, 2004 and 2003, Glass Corp. had 120,000 shares of common stock and 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2004 or 2003. Net income for 2004 was $400,000. For 2004, earnings per common share amounted to a. $3.33. b. $2.92. c. $2.50. d. $1.67. 9. In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would a. fairly present diluted earnings per share on a prospective basis. b. fairly present the maximum potential dilution of diluted earnings per share on a prospective basis. c. reflect the excess of the number of shares assumed issued over the number of shares assumed reacquired as the potential dilution of earnings per share. d. be antidilutive. 10. Reese Co. had 300,000 shares of common stock issued and outstanding at December 31, 2003. No common stock was issued during 2004. On January 1, 2004, Reese issued 200,000 shares of nonconvertible preferred stock. During 2004, Reese declared and paid $125,000 cash dividends on the common stock and $100,000 on the preferred stock. Net income for the year ended December 31, 2004 was $775,000. What should be Reese's 2004 earnings per common share? a. $2.59 b. $2.25 c. $2.16 d. $1.84
