4 Page Paper On Marketing

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Prior to this assignment, review Chapter 12: Global Marketing Channels and Physical Distribution and analyze Case 12-2: Can Walmart Crack the Retail Code in India? carefully. Review the Intro and Company Profile sections in the Walmart Case Study (Links to an external site.) interactive.

Your assignment has two parts. Part A will be based on a case in Chapter 12, and Part B will be built upon your Final Paper about Walmart from your BUS621: Leadership and Teamwork course.

Introduction
Walmart today is a global retail giant. According to Carbonara (2018) in the recommended resource Walmart, Amazon Top World’s Largest Retail Companies (Links to an external site.) article, Walmart is the world’s largest retail company with continued plans for global growth. There are many competitors, one of which is Amazon. How will Walmart continue to be a global giant in the years to come? To maintain the market leader position Walmart will be required to continually look for ways to outgrow its global competitors (Carbonara, 2018).

To understand Walmart and where it is today and what tomorrow holds, it is important to understand the company’s foundation. “Sam Walton opened his first five-and-dime in 1950. His vision was to keep prices as low as possible” (Wilbert, 2018, para. 1). Walton opened the first Walmart in the early 1960s in Rogers, AK (Wilbert, 2018, para. 2). One thing that has and will always remain a key component for all Walmart stores is to keep expenses low. There has always been a mentality behind the vision of Walton to demand that employees always keep costs to a bare minimum (Wilbert, 2018, para. 3). On average, “Walmart saves a typical American family of four about $2500 a year. That’s about what a family of four gets from the government in food stamps. That makes Walmart a major antipoverty force in the United States” (Kestenbaum, 2017, para. 3). Another factor to consider when thinking about Walmart is that “since 1990, the global rate of poverty has been cut by two-thirds. That’s the sharpest decline in human poverty in all of history, more than one billion people have been lifted out of poverty during that period and Walmart is a major force in that effect” (Kestenbaum, 2017, para. 3).

Today, Walmart has grown considerably and continues to expand. Just to get an idea of how large this retail giant is, consider the following:

  • Walmart employs 1.6 million people.
  • Walmart has 6,200 retail outlets. In contrast, Home Depot has 2,040. (Wilbert, 2018, para. 4)

One might question, “What does Walmart do to continue to be successful and keep costs to a minimum?” There are several things that this retail giant has incorporated into the operations. First, “Walmart became the first major retailer to demand manufacturers use radio frequency identification technology (RFID). The technology uses radio frequencies to transmit data stored on small tags attached to pallets or individual products. As explained in the recommended resource How Wal-Mart Works (Links to an external site.), RFID tags hold significantly more data than bar codes” (Wilbert, 2018, para. 6). For information on how RFIDs and radio waves work, you may like to review the articles How RFID Works (Links to an external site.) and How Radio Works (Links to an external site.). You may also be interested in reviewing the  Is Walmart Good or Bad for America? The Question May Be Outdated (Links to an external site.) article which explains another interesting fact, which is that “Walmart is the single most important pipeline distributing wealth from rich countries to poor countries” (Kestenbaum, 2017, para. 3).

One concern pertaining to Walmart is how employees are treated. It is well known that Walmart not only pays low wages, but their practices have impacted how their suppliers manage production costs while sacrificing the safety of their labor force (Kestenbaum, 2017). Walmart tends to hire mostly part-time workers (Kestenbaum, 2017). Some may even say that Walmart “pays their workers poverty wages” (Kestenbaum, 2017, para. 4). There have long been ethical concerns about how Walmart operates and manages its employees.

Case Study Assignment
Throughout your MBA program you will cover various subjects as they relate to business. You will initially have an opportunity in BUS621 Leadership and Teamwork to create and build your own Walmart in a new global location. Your choices for location include Peru, New Zealand, Philippines, Egypt, Czech Republic, and United Arab Emirates. As you progress through each course in the program you will build upon your case study of Walmart.

The purpose of this Walmart Case Study is to give you an opportunity to apply the subject matter from each course in the MBA program to an ongoing strategic development. The knowledge gained from the case study in each course will be cumulative. The knowledge will assist you in demonstrating your ability to conduct critical analysis and decision making across a wide range of subjects throughout the MBA program.

Methodology
The case study is based upon past and current information about Walmart and the country of destination. You will select a country to develop your case and will use the same country in each course of the MBA program.

You will be responsible for gathering as much information as needed that will help you with determining the course of action that Walmart should pursue in the company’s quest to growth and to meeting the needs of international markets.

Part A: Read Case 12.1: Can Walmart Crack the Retail Code in India? and answer the following questions:

  • Summarize some of the elements in India’s political, economic, and cultural environments that can impact the market opportunity.
  • Explain some of the obstacles facing Walmart and other foreign retailers in India.
  • Review Figure 12-4. Explain which quadrant of the matrix applies most directly to India. Provide your rationale.

Part B: In your BUS621: Leadership and Teamwork course, you selected a country for Walmart to expand to, and you also analyzed the nine dimensions of the culture and the leadership models and skills that would apply to your selected country. In this assignment, you will work and build on your previous Walmart work, and develop some place strategies as Walmart expands on its global marketing activities to the country of your choice. Address the following points for the selected country:

  • Summarize some of the elements in your selected country’s political, economic, and cultural environments that can impact the market opportunity for Walmart expansion.
  • Based on your environmental review and referring to Figure 12-4, discuss what market expansion strategy you would suggest for Walmart in your selected country.
  • You learned that channels create utility for customers (place utility, form utility, time utility, and information utility) that can be leverages as a source of competitive advantage. Analyze each of these utilities that Walmart may be creating in the country of your choice, and explain which one can potentially work as a competitive advantage for Walmart considering its target market and their needs, wants, and preferences in your selected country.
  • Considering the growth of global online retailers like Amazon.com, Aliexpress.com, Target.com, and eBay.com as competitors of Walmart.com, and based on the factors you evaluated in Part A, formulate a SWOT analysis for Walmart.com in your selected country.

The Walmart Case Study paper

Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center. See the Formatting Your References List (Links to an external site.) resource in the Ashford Writing Center for specifications.

Carefully review the Grading Rubric (Links to an external site.) for the criteria that will be used to evaluate your assignment.

 
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Investment Formula Calculation

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Sheet1

A Treasury bill with 130 days to maturity is quoted at 98.540. What is the bank discount yield, the bond equivalent yield, and the effective annual return? (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. Omit the “%” sign in your response.)
  Discount yield  %
  Bond equivalent yield  %
  Effective annual return  % Cannot figure out Effect Rate of Return Calculation
Please provide correct formula and answer for calculation

Sheet3

A Treasury bill purchased in December 2015 has 149 days until maturity and a bank discount yield of 3.72 percent. Assume a $100 face value.
What is the price of the bill as a percentage of face value? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places. Omit the “%” sign in your response.)
  Price  % 98.46033333
What is the bond equivalent yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
  Bond equivalent yield  % Cannot figure out Bond Equivalent yield
Need formula to calcule this answer

Sheet4

The treasurer of a large corporation wants to invest $16 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 6.64 percent; that is, the EAR for this investment is 6.64 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. If the term of the instrument is 80 days, what are the bond equivalent and discount yields on this investment? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
 Bond equivalent yield  % %
  Discount yield  % %

Sheet5

Rolling Company bonds have a coupon rate of 4.40 percent, 16 years to maturity, and a current price of $1,106. What is the YTM? The current yield? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
  YTM  % %
  Current yield  % %

Sheet6

A bond sells for $925.36 and has a coupon rate of 7.60 percent. If the bond has 20 years until maturity, what is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
 Yield to maturity %

Sheet7

May Industries has a bond outstanding that sells for $833. The bond has a coupon rate of 8.00 percent and 15 years until maturity. What is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
Yield to maturity

Sheet8

Atlantis Fisheries issues zero coupon bonds on the market at a price of $612 per bond. Each bond has a face value of $1,000 payable at maturity in 11 years. What is the yield to maturity for these bonds? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response
 Yield to maturity %

Sheet9

Atlantis Fisheries issues zero coupon bonds on the market at a price of $513 per bond. These are callable in 5 years at a call price of $570. Using semiannual compounding, what is the yield to call for these bonds?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
 Yield to call %

Sheet10

Atlantis Fisheries issues zero coupon bonds on the market at a price of $423 per bond. If these bonds are callable in 7 years at a call price of $541, what is their yield to call? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
Yield to call %

Sheet11

Great Wall Pizzeria issued 7-year bonds one year ago at a coupon rate of 6.5 percent. If the YTM on these bonds is 8.6 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “$” sign in your response.)
Price

Sheet12

Both bond A and bond B have 7.4 percent coupons and are priced at par value. Bond A has 7 years to maturity, while bond B has 16 years to maturity.
If interest rates suddenly rise by 1.8 percent, what is the percentage change in price of bond A and bond B? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
  Bond A  %
  Bond B  %
If interest rates suddenly fall by 1.8 percent instead, what would be the percentage change in price of bond A and bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)
  Bond A  %
  Bond B  %

Sheet13

LKD Co. has 11 percent coupon bonds with a YTM of 8.7 percent. The current yield on these bonds is 9.6 percent. How many years do these bonds have left until they mature? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  Bonds mature  years

 

 

4.160%

 

4.160%

 

4.043%

 

4.043%

 
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Managerial Decision Analysis Homework (Excel Spreadsheet)

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M2 Group Assignment Instructions Complete the Assignment, name it as GroupXX_Assign2.xls (where XX is your Group Name), and upload and submit to the instructor through Dropbox. Do not enter anything in the spreadsheet cells that are black, labeled “Grader”. You must complete this assignment without the assistance of persons other than the members of your Group. You may use any other resources you deem necessary. Answer the questions below by placing the appropriate graph and/or answers in the designated cells of the spreadsheet.

DO NOT CHANGE THE APPEARANCE OR FUNCTIONALITY OF THE SPREADSHEET UNLESS INSTRUCTED TO DO SO.

Question 1 (35 points) Office Support, Inc. provides on-site repair for most large photocopy machines. It currently has five trained repair teams that it sends out on an on-call basis. Since the company advertises one-day service, it will not accept more than five requests for service per day. Two months ago, the vice president started considering expanding the workforce. At that time he asked the call desk to record the actual calls for each of the next 40 days. The data to respond to the questions below are provided in the Office worksheet. Define the random variable x as the number of service calls per day. Clearly x is a discrete random variable.

a. 3 points: Use built-in Excel functions to find the minimum and maximum values of x. That is, find the minimum number and maximum number of service calls per day over the 40 day period.

• Place the minimum in cell E2. • Place the maximum in cell E3.

b. 3 points: Based on the minimum and maximum number of service calls per day in the sample of

40 days, specify the complete range of x. That is, make a list of all possible outcomes of x under the column labeled x starting in cell G2.

c. 5 points: Using the built-in Excel function named COUNTIF, calculate the count (frequency) of

each outcome (x) in the sample. In general, your function with its arguments will appear as “=COUNTIF(argument 1, argument 2),” where argument 1 is the data range and argument 2 is a cell reference containing a specific outcome value. Start by finding the count for x = 0, then finding the count for all other outcomes. The values will be under the column labeled “Count.”

• In the first unused cell following the last count value (from above), use Excel’s built-in SUM function to calculate the total count (frequency). For example, if the count cells went from H2:H7, enter the sum in cell H8. Format the sum cell (box, color, etc.) to highlight that it contains the sum of the values above it.

d. 6 points: Beginning in cell I2, write a formula to calculate the probability of each outcome, based

on the concept of relative frequency. Reference the cell containing the sum of counts (from above) as an absolute reference in your formula, but reference the cell containing the count as a relative reference.

• In the first unused cell following the last probability value (from above), use Excel’s built-in SUM function to calculate the total probability. For example, if the probability cells went from I2:I7, enter the sum in cell I8.

 

 

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• Format all the probability values (including the sum of probabilities) in column I using 3 decimal places. Format the sum cell (box, color, etc.) to highlight that it contains the sum of the values above it.

e. 4 points: In cell K9, calculate the expected value, that is, find the average number of service calls

per day. The formula for Expected Value is: ( ) ( )E x x P x= ⋅∑ • To calculate the expected value you should first write a formula in cell K2 and drag it to K8.

The formula in cell K2 should make relative reference to the values in cell G2 and cell I2.

f. 10 points: In cell N9, calculate the variance, that is, find the variance for the random variable number of service calls per day. The formula for Variance is [ ]2( ) ( )( )Var x P xx E x= ⋅−∑ . To calculate the variance you will first be required to follow these steps. • Provide formulas in cells L2 through L8 that find the difference in each value of x and the

expected value, that is, a formula for[ ]( )x E x− . The formulas should make absolute reference to the expected value in cell K9, and relative reference to the values in cells G2 through G8.

• Provide formulas in cells M2 through M8 that square the differences found in cells L2 through L8, that is, formulas for[ ]2( )x E x− .

• Provide formulas in cells N2 through N8 that multiply the squared differences found in cells M2 through M8 by the probability values calculated in column I, that is, formulas for

[ ]2 ( )( ) P xx E x ⋅− . • Calculate the Variance and place the value in cell N9. • In cell N10, calculate the standard deviation. Recall that the formula for the standard

deviation is ( )StdDev Var x= .

g. 2 points: In cell L13, calculate the probability that Office Support will have two or more service calls per day. That is, find ( 2)P X ≥ .

h. 2 points: In cell L14, calculate the probability that Office Support will have less than two service calls per day. That is, find ( 1)P X ≤ .

 

Question 2 (15 points) Asterex Inc. produces silicon gaskets that are used to connect piping materials for the petroleum industry. The gaskets are ring shaped, and look like a thin donut with a big hole in the center. It is important that the gaskets have the proper inside diameter (ID), outside diameter (OD), and wall thickness. The quality control department samples and tests gaskets every 15 minutes to ensure conformance to quality characteristics and engineering specifications for the three quality dimensions. Recently, there has been some concern about the OD of the gaskets. A sample of 100 gasket OD measures was taken and the data is in column B. If the gasket production machine is working properly, the population of gasket OD measures can be reasonably modeled by a Normal distribution with mean OD = 400 mm and standard deviation OD = 2 mm. Use the spreadsheet named Asterex.

a. 5 points: Find the values for the sample statistics indicated in column D. Use a built-in Excel

function or formula when appropriate. Place the appropriate function or formula for each statistics in the indicated cell in column E.

 

 

 

3

b. 5 points: The engineering specifications provide that a gasket should be between 395 mm and

405 mm, otherwise a gasket is defective. Assuming the process is working correctly; find the probability that a randomly selected gasket is not defective. Use Excel’s built-in function for the Normal distribution to answer the question, and place the value in cell J2.

c. 5 points: The engineering specifications provide that a gasket should be between 395 mm and

405 mm, otherwise a gasket is defective. Assuming the process is working correctly; find the probability that a randomly selected gasket is defective. Use Excel’s built-in function for the Normal distribution to answer the question, and place the value in cell J4.

Question 3 (35 points) For the coming season, Savannah Bee Company plans to introduce a new product called Orange Blossom Honey. Savannah Bee faces the decision of how many units of Orange Blossom Honey to produce for the coming holiday season.

Members of the management team recommended production quantities of 1,500, 1,800, 2,400, and 2,800. The different production quantities reflect considerable disagreement regarding the market potential of the new product. The product management team has contracted you for an analysis of the stock out probabilities for various production quantities, an estimate of the profit potential, and to help make a production quantity recommendation.

Savannah Bee expects to sell Orange Blossom Honey for $20, and the cost is $11 per unit. If inventory remains after the holiday season, Savannah Bee will sell all surplus inventory for $10 per unit. After reviewing the sales history of similar products, Savannah Bee’s senior sales forecaster predicted an expected demand of 2,000 units with a 0.9 probability that demand would be between 1,000 units and 3,000 units.

a. 6 points: Please use sales forecaster’s prediction to describe a normal probability distribution that can be used to approximate the demand distribution. Compute the normal distribution’s standard deviation. (Place the answer in Cell C2 and the formula(s) in Cells G2:K2)

 

b. 6 points: Once you have approximated the demand using a normal distribution, please compute the probabilities of a stock out for the production quantities suggested by members of the management team. (Place the answers in Cells C7:C10)

c. 16 points: Assuming three cases scenarios (i.e., worse case with a sales quantity of 1,000 units; most likely case with a sales quantity of 2,000 units; and best case with a sales quantity of 3,000 units), please figure out the projected profit for the production quantities suggested by the management team. Complete the tables in Cells B13: J39 by writing formulas and using Excel functions when necessary.

1,000 2,000 3,000

 

 

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d. 7 points: One of the managers felt that the profit potential was so great that the production quantity should have a 90% chance of meeting demand and only a 10% chance of any stock-out. What quantity would be produced under this policy? (Place your answer in Cell C44)

Question 4 (15 points) Gateway 2000 Inc. receives large shipments of microprocessors from Intel Corp. It must try to ensure that the proportion of microprocessors that are defective is small. Suppose Gateway samples and tests 5 microprocessors out of a shipment of thousands of these microprocessors. Suppose also that if at least 1 of the microprocessors is defective, the shipment is returned. This sampling and inspection scheme can be modeled as a Binomial process with parameters n and p. Define x = the number of defective microprocessors out of 5 sampled and inspected. Use the spreadsheet named Gateway.

a. 2 points: Starting in cell A3, moving down, list all possible values for the number of defective microprocessors (out of 5 sampled).

b. 6 points: Suppose that Intel Corp.’s shipment contains 10% defective microprocessors. Use

Excel’s built-in function for the Binomial distribution to calculate the probability for each outcome you listed in column A. Start the probability calculations in cell B3 and move down. Also, show that you ensured that the sum of the probabilities of all possible outcomes is 1.

c. 1 points: Again, suppose that Intel Corp.’s shipment contains 10% defective microprocessors. In

cell C11, find the average number of defectives we expect in a sample of 5 microprocessors.

d. 3 points: Again, suppose that Intel Corp.’s shipment contains 10% defective microprocessors. In cell C13, provide the probability that the entire shipment will be returned (assuming 10% defect rate and 5 microprocessors sampled).

e. 3 points: In cell C15, calculate the probability that the entire shipment will be kept by Gateway

even though the shipment has 10% defective microprocessors assuming 5 microprocessors are sampled.

 

 

  • For the coming season, Savannah Bee Company plans to introduce a new product called Orange Blossom Honey. Savannah Bee faces the decision of how many units of Orange Blossom Honey to produce for the coming holiday season.
  • Members of the management team recommended production quantities of 1,500, 1,800, 2,400, and 2,800. The different production quantities reflect considerable disagreement regarding the market potential of the new product. The product management team …
  • Savannah Bee expects to sell Orange Blossom Honey for $20, and the cost is $11 per unit. If inventory remains after the holiday season, Savannah Bee will sell all surplus inventory for $10 per unit. After reviewing the sales history of similar produ…
  • a. 6 points: Please use sales forecaster’s prediction to describe a normal probability distribution that can be used to approximate the demand distribution. Compute the normal distribution’s standard deviation. (Place the answer in Cell C2 and the f…
  • b. 6 points: Once you have approximated the demand using a normal distribution, please compute the probabilities of a stock out for the production quantities suggested by members of the management team. (Place the answers in Cells C7:C10)
  • c. 16 points: Assuming three cases scenarios (i.e., worse case with a sales quantity of 1,000 units; most likely case with a sales quantity of 2,000 units; and best case with a sales quantity of 3,000 units), please figure out the projected profit for…
  • d. 7 points: One of the managers felt that the profit potential was so great that the production quantity should have a 90% chance of meeting demand and only a 10% chance of any stock-out. What quantity would be produced under this policy? (Place yo…
 
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MCQs

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Your uncle, who has a second home in Bethany Beach, Delaware, is planning to sell it in the next few weeks. You are interested in buying this beachside property, so your agent negotiates a price for the house with your uncle’s agent. This transaction is an example of

the assumption of arm’s-length transactions

the matching principle.

the cost principle.

the realization principle.

the going-concern assumption.

Dell Computer Corporation has receivables of $2.5 million and inventory worth $1.8 million. The firm plans to borrow $2 million for working capital purposes from Austin First National Bank. In evaluating the loan request, the bank should place the most emphasis on

the matching principle.

the assumption of arm’s-length transactions.

the realization principle.

the going-concern assumption.

Tyson Corporation bought raw materials on April 23, 2008 and also on July 2, 2008. Products produced in the months of May were sold in July. The firm uses FIFO to value its inventory. According to the matching principle, the firm’s accountant should associate

Neither of these dates is valid because the products were sold in July.

the inventory acquired on July 2 with the products sold.

the inventory acquired on April 23 with the products sold.

none of these

The time value of money refers to the issue of

[removed] why a dollar received tomorrow is worth the same as a dollar received today.

 

[removed] none of these.

 

[removed] what the value of the stream of future cash flows is today.

 

[removed] why a dollar received tomorrow is worth more than a dollar received today.
 

 

 Using higher discount rates will

 

[removed] none of these.

 

[removed] not affect the present value of the future cash flow.

 

[removed] increase the present value of any future cash flow.

 

[removed] decrease the present value of any future cash flow.

Your aunt is looking to invest a certain amount today. Which of the following choices should she opt for?

 

[removed] three-year CD at 6.25% annual rate

 

[removed] three-year CD at 6.5% annual rate

 

[removed] three-year CD at 7% annual rate

 

[removed] three-year CD at 6.75% annual rate

Which ONE of the following statements is true about amortization?

 

[removed] A loan amortization schedule is just a table that shows the loan balance at the beginning and end of each period, the payment made during that period, and how much of that payment represents interest and how much represents repayment of principal.

 

[removed] All of these are true.

 

[removed] With an amortized loan, each loan payment contains some payment of principal and an interest payment.

 

[removed] Amortization refers to the way the borrowed amount (principal) is paid down over the life of the loan.

Which one of the following statements is TRUE about the effective annual rate (EAR)?

 

[removed] The effective annual interest rate (EAR) is defined as the annual growth rate that takes compounding into account.

 

[removed] The EAR conversion formula accounts for the number of compounding periods and, thus, effectively adjusts the annualized interest rate for the time value of money.

 

[removed] The EAR is the true cost of borrowing and lending.

 

[removed] All of these are true.

The true cost of lending is the

 

[removed] quoted interest rate.

 

[removed] none of these.

 

[removed] effective annual rate.

 

[removed] annual percentage rate.

Which one of the following statements is NOT true?

 

[removed] The APR is the annualized interest rate using simple interest.

 

[removed] The correct way to annualize an interest rate is to compute the annual percentage rate (APR).

 

[removed] You can find the interest rate per period by dividing the quoted annual rate by the number of compounding periods.

 

[removed] The correct way to annualize an interest rate is to compute the effective annual interest rate (EAR).

 

If you are dealing with percentage returns, then which of the following is generally true?

 

[removed] The variance of the return distribution is generally larger than the standard deviation.

 

[removed] None of these is generally true.

 

[removed] The variance of the return distribution is measured in the same units as expected return.

 

[removed] The variance of the return distribution is generally smaller than the standard deviation.

The return distribution for an asset is as shown in the following table. What are the missing values if the expected return is 10 percent?

Return Probability
0.1 0.25
X 0.5
X 0.25

 

[removed] 0.20

 

[removed] 0.15

 

[removed] 0.10

 

[removed] None of these

Moshe purchased a stock for $30 last year. He found out today that he had a –100 percent return on his investment. Which of the following must be true?

 

[removed] a) The stock is worth $30 today.

 

[removed] b) The stock is worth $0 today.

 

[removed] c) The stock paid no dividends during the year.

 

[removed] d) Both b and c must be true.

Which of the following investment classes had the greatest variability in returns for recent historical data?

 

[removed] Large U.S. Stocks

 

[removed] Small U.S. Stocks

 

[removed] Intermediate-Term Government Bonds

 

[removed] Long-Term Government Bonds

If a bond’s coupon rate is equal to the market rate, then the bond will sell

 

[removed] none of these are true.

 

[removed] at a price less than its face value.

 

[removed] at a price equal to its face value.

 

[removed] at a price greater than its face value.

Bonds sell at a discount off the par value when market rates for similar bonds are

 

[removed] less than the bond’s coupon rate.

 

[removed] greater than the bond’s coupon rate.

 

[removed] equal to the bond’s coupon rate.

 

[removed] Market rates are irrelevant in determining a bond’s price.

hich of the following statements is most true about zero coupon bonds?

 

[removed] They are always convertible to common stock.

 

[removed] They typically sell at a premium over par when they are first issued.

 

[removed] They typically sell at a deep discount below par when they are first issued.

 

[removed] They typically sell for a higher price than similar coupon bonds.

The expected return on Kiwi Computers stock is 16.6 percent. If the risk-free rate is 4 percent and the expected return on the market is 10 percent, then what is Kiwi’s beta?

 

[removed] 3.15

 

[removed] 2.10

 

[removed] 1.26

 

[removed] 2.80

Payback: Binder Corp. has invested in new machinery at a cost of $1,450,000. This investment is expected to produce cash flows of $640,000, $715,250, $823,330, and $907,125 over the next four years. What is the payback period for this project?

 

[removed] 1.88 years

 

[removed] 3.00 years

 

[removed] 4.00 years

 

[removed] 2.12 years

Payback: Elmer Sporting Goods is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $812,500, and 1,200,000 over the next three years. What is the payback period for this project?

 

[removed] 2.43 years

 

[removed] 3 years

 

[removed] 1.57 years

 

[removed] More than 3 years

Payback: Kathleen Dancewear Co. has bought some new machinery at a cost of $1,250,000. The impact of the new machinery will be felt in the additional annual cash flows of $375,000 over the next five years. What is the payback period for this project? If their acceptance period is three years, will this project be accepted?

 

[removed] 2.67 years; yes

 

[removed] 2.67 years; no

 

[removed] 3.33 years; yes

 

[removed] 3.33 years; no

Payback: Carmen Electronics bought new machinery for $5 million. This is expected to result in additional cash flows of $1.2 million over the next seven years. What is the payback period for this project? If their acceptance period is five years, will this project be accepted?

 

[removed] 4.17 years; no

 

[removed] 3.83 years; yes

 

[removed] 3.83 years; no

 

[removed] 4.17 years; yes

Discounted payback: Carmen Electronics bought new machinery for $5 million. This is expected to result in additional cash flows of $1.2 million over the next seven years. The firm’s cost of capital is 12 percent. What is the discounted payback period for this project? If the firm’s acceptance period is five years, will this project be accepted?

 

[removed] 6.1 years; no

 

[removed] 4.6 years; yes

 

[removed] 5.4 years; no

 

[removed] 4.2 years; yes

Stillwater Drinks is trying to determine when to harvest the water from the fountain of youth that it currently owns. If it harvests the water in year 1, the NPV of the project would increase over an immediate harvest by 18 percent. A year 2 harvest would create an NPV increase of 12 percent over that of year 1 and year 3 would create an NPV increase of 8 percent over that of year 2. If the cost of capital is 17 percent for Stillwater, then which harvest year would maximize the NPV for the firm? Assume that all NPVs are calculated from the perspective of today.

 

[removed] Harvest in year 1.

 

[removed] Harvest immediately.

 

[removed] Harvest in year 3.

 

[removed] Harvest in year 2.

The proper time to harvest an asset is when

 

[removed] the percentage NPV increase of harvesting a project at a future point in time is at the last date where the increase is greater than the cost of capital.

 

[removed] the percentage NPV increase of harvesting a project at a future point in time is at the first date where the increase is less than the cost of capital.

 

[removed] the percentage NPV increase of harvesting a project at a future point in time is at the first date where the increase is greater than the cost of capital.

 

[removed] None of the above.

Norman, Inc., is considering two mutually exclusive projects. Project A is a six-year project with a NPV of $3,000 and Project B is a four-year project with an NPV of $2,278. Project A has an equivalent annual cash flow of $730 and Project B has an equivalent annual cash flow of $750. Which project should the firm select?

 

[removed] Choose Project B because it has the lower NPV.

 

[removed] Choose Project B because it has the higher equivalent annual cash flow.

 

[removed] Choose Project A because it has the lower equivalent annual cash flow.

 

[removed] Choose Project A because it has the higher NPV.

Champagne, Inc., had revenues of $12 million, cash operating expenses of $8 million, and depreciation and amortization of $1.5 million during 2008. The firm purchased $700,000 of equipment during the year while increasing its inventory by $500,000 (with no corresponding increase in current liabilities). The marginal tax rate for Champagne is 30 percent.

Free cash flow: What are Champagne’s cash flows associated with investments for 2008?

 

[removed] $500,000

 

[removed] $700,000

 

[removed] $1,200,000

 

[removed] None of these

Calculating operating leverage. Swan’s Bicycle Boats had a degree of accounting operating leverage equal to 1.50 during the most recent period. If the firm’s EBITDA was $5,000 and its fixed costs were equal to $1,750, then what was Swan’s depreciation and amortization expense during the same period?

 

[removed] $1,500

 

[removed] $2,833

 

[removed] $500

 

[removed] $1,000

Break-even analysis. IronVerks Ribshack has total fixed costs of $8,500 per month. It sells rib plates for $15 each, and the variable cost of providing each plate is $10. What is the pretax operating cash flow break-even point for IronVerks?

 

[removed] 8,500 plates.

 

[removed] 567 plates.

 

[removed] 1,700 plates.

 

[removed] None of these

Break-even analysis. Monochrome Sun Glasses has found that its pretax operating cash flow basis break-even number of glasses sold is 770,000 pairs. If each pair is sold for $25 and the variable cost per unit is $15, then what is the amount of Monochrome’s fixed costs?

 

[removed] $11,550,000

 

[removed] $77,000

 

[removed] $7,700,000

 

[removed] $1,155,000

Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 percent, what is the profitability index of the project?

 

[removed] 2.18

 

[removed] 1.09

 

[removed] 2.09

 

[removed] 0.09

Overall cost of capital: If the market risk premium is currently 6 percent and the risk-free rate of return is 4 percent, then what is the expected return on a common share with a beta equal to 2?

 

[removed] 8.0%

 

[removed] 10.0%

 

[removed] 12.0%

 

[removed] 16.0%

How firms estimate their cost of capital: The Diverse Co. has invested 40 percent of the firm’s assets in a project with a beta of 0.4 and the remaining assets in a project with a beta of 1.8. What is the beta of the firm?

 

[removed] None of these

 

[removed] 1.28

 

[removed] 1.24

 

[removed] 0.96

The cost of equity: Oasis, Inc., has common shares with a price of $21.12 per share. The firm is expected to pay a dividend of $1.75 one year from today, and dividends are expected to grow at 10 percent for two years after that and then at 5 percent thereafter. What is the implied cost of common equity capital for Oasis?

 

[removed] 15%

 

[removed] 14%

 

[removed] 16%

 

[removed] 13%

The cost of preferred equity: Billy’s Goat Coats has a preferred share issue outstanding with a current price of $38.89. The firm last paid a dividend on the issue of $3.50 per share. What is the firm’s cost of preferred equity?

 

[removed] 7%

 

[removed] 10%

 

[removed] 8%

 

[removed] 9%

M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

How much is Dynamo worth today?

 

[removed] $2,143

 

[removed] None of these.

 

[removed] $1,765

 

[removed] $1,500

M&M Proposition 2: Swirlpool, Inc., has a WACC of 11%, a cost of debt of 8%, and a cost of equity of 12%. What must the debt-to-equity ratio be?

 

[removed] None of these.

 

[removed] 1/4

 

[removed] 1/6

 

[removed] 1/2

M&M Proposition 2: Melba’s Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm’s marginal corporate income tax rate is 35%. What is the appropriate WACC?

 

[removed] 7.44%

 

[removed] 8.17%

 

[removed] 8.80%

 

[removed] 6.35%

The pecking order theory: A firm wishes to undertake a project that costs $150mm. It currently has $10mm in cash on hand and believes that it can raise $75mm in debt and $100mm in equity if needed. According to the pecking order theory of the capital structure, what percent of the project will be financed by debt?

 

[removed] 50%

 

[removed] 26.67%

 

[removed] 0%

 

[removed] None of these

Break-even analysis: Jackson Electronics makes circuit boards and markets them to electronic goods manufacturers. The firm has nonsalary fixed costs of $212,000 and salary costs of $134,250. Each circuit board is sold at a price of $111.50 and involves variable costs of $81.73 per unit. What is the break-even point for Jackson?

 

[removed] 4,237

 

[removed] 3,714

 

[removed] 3,105

 

[removed] 11,631

Multiple Analysis: Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.

 

[removed] $453.6 million

 

[removed] $1,334 million

 

[removed] $1,787 million

 

[removed] $1,315 million

Multiple Analysis: Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the value of Turnbull Corp’s debt? Round to the nearest million dollars.

 

[removed] $121 million

 

[removed] $165 million

 

[removed] $59 million

 

[removed] $97 million

Income approaches: Quicksilver Software Co. is expected to grow rapidly in the next three years and then have no growth for the foreseeable future. The firm expects free cash flows of $9.1 million, $11.4 million, and $17.7 million over the next three years, and thereafter its cash flows will stay constant. The company has no nonoperating assets. If the appropriate WACC is 12 percent and debt of 44.5 million, what is the equity value of this business? Round to the nearest million.

 

[removed] $135 million

 

[removed] $105 million

 

[removed] $45 million

 

[removed] $90 million

Spot rate: Tantrix, Inc., purchased its inventory from an Indian manufacturer at a cost of Rs.5,325,000. The dollar cost of this payable is $125,634.07 at today’s spot rate. What is the spot rate today?

 

[removed] Rs. 4.2385/$

 

[removed] $4.2385/Rs

 

[removed] Rs.42.3850/$

 

[removed] $42.3850/Rs

Spot rate: If the spot rate is quoted as $0.009369/¥, what is the exchange rate in terms of yen per dollar?

 

[removed] ¥0.009369/$

 

[removed] ¥0.936900/$

 

[removed] ¥106.7350/$

 

[removed] ¥16.7350/$

Spot rate: Given that the spot rate is $1.5136/€ and the 90-day forward quote is $1.4974/€, we can say that

 

[removed] the euro is at a forward premium against the U.S. dollar.

 

[removed] the U.S. dollar is at a forward premium against the euro.

 

[removed] the dollar is at neither a premium nor a discount against the euro.

 

[removed] the U.S. dollar is at a forward discount against the euro.

 

 
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