Why is marketing research important to the development of a marketing strategy?

Uber has had phenomenal growth, going from four people in 2009 to the two kinds of workers it deals with today: (1) 12,000 full-time nondriver employees, such as those working in its San Francisco headquarters, and (2) about 2 million active drivers globally, the independent contractors it calls “partners.”

Uber’s Employees

Former CEO Travis Kalanick viewed human resources (HR) as having one function—recruiting. Other HR functions were not a priority for Uber. For example, the company had fewer than 10 HR representatives in 2016 who were responsible for training managers and handling issues such as sexual harassment for the 6,000 employees it had at the time. “When HR becomes solely a talent race, boards and CEOs can miss the less obvious but equally vital value of managing both new hires and leaders who are facing increasing demands,” says John Boudreau in a Harvard Business Review article.

Kalanick’s lack of focus on HR created a toxic atmosphere at the organization. Much of this became evident with Susan Fowler, a former Uber engineer. Fowler claimed in a February 2017 blog that she was sexually harassed by her supervisor and that HR ignored her claims. Other employees have since reported that a premium was placed on workers who delivered strong performance and aggressive growth, and that their inappropriate workplace behavior was overlooked, according to the New York Times.

Uber attempted to improve this situation by focusing on the accuracy of its performance evaluations. In the past, performance reviews were subjective with managers simply meeting behind closed doors and rating their employees. This obviously increased the potential for managerial bias. The process also was deficient in that employees did not have individual goals to be evaluated against, making it hard to hold employees and managers accountable for objective results.

Uber implemented two significant changes in 2017 to overcome problems with its appraisal system. First, the company established measurable goals for all employees, and they were transparent for all to see. Second, Uber implemented something similar to a 360-degree performance appraisal system as evaluations needed to take into account more than a manager’s direct observation of subordinates. The system consisted of committees reviewing employees’ self-evaluations, peer evaluations, and manager evaluations to make sure bonuses were given out fairly, according to Uber Chief People Officer Liane Hornsey.

While these changes may have improved the human resource process at Uber, employee issues still persist. For example, HR Chief Hornsey resigned in July 2018 amid continuing employee dissatisfaction. “Disgruntled employees still don’t trust Uber’s systems, and they are turning to the media to air their grievances. This suggests that Khosrowshahi’s attempt to build trust among employees, an assurance that the company can address challenges internally, has not taken hold,” says Wired Magazine.

Uber’s Drivers

Uber isn’t only failing its employees; it’s also failing its drivers. The company seems to offer very little in human resource development for its contractors. Drivers are given the option of watching a 13-minute training video covering such topics as how to provide good service and get five-star ratings from customers. “The only safety thing they tell us,” says one driver, “is to have a hands-free phone holder and to keep your eyes on the road.” Drivers who want additional training will have to pay for it on their own. Uber has contracted with 7x7 Experience to offer quality improvement courses at a rate of $49 per course. They can also take a course on “Tip Maximization” for another $29.

Uber drivers may not be happy about having to pay for quality improvement courses, especially because a recent study found they aren’t making that much. The Economic Policy Institute released a 2018 analysis showing that Uber drivers take home around $9.21 an hour. This means drivers are making less than the minimum wage of some of Uber’s biggest markets, such as Chicago, Los Angeles, and New York. The $9.21 figure actually “puts Uber drivers at the bottom 10 percent of wage earners” according to the Chicago Tribune.

Drivers, often undertrained, are also victims of an automated performance appraisal system in which passengers rate drivers on a scale of from 1 to 5 stars. Each driver then receives a weekly average rating for all passengers, and this average is used to make personnel decisions. In Atlanta, for example, a driver receiving less than 4.6 stars may be kicked out of the program. Uber did update its ratings system in July 2017 by introducing a “ratings protection” initiative. This system was designed to protect drivers from complaints that are unrelated to their actual performance. For example, when a rider selects a rating below 5 stars, a screen will pop up asking “what could be improved?” Options include “route by Uber” and “co-rider,” and only one option goes back to the driver.

Uber drivers may not have much power to fight back against the company’s HR policies. The company is resisting unionization because it wants its app-based drivers to be “business partners”—that is, contractors not subject to employee-protection laws. The issue of unionization is being fought in the courts. In 2015, Seattle passed an ordinance allowing Uber (and Lyft) drivers to unionize, which the U.S. Chamber of Commerce and Uber have sought to overturn. In May 2018, the Ninth Circuit Court of Appeals reversed a lower court’s 2017 decision to uphold the law, continuing the legal saga by sending the case back to the lower court for further review.

Uber has worked to improve and safeguard its driver performance appraisal rating system, yet it still lacks some of the basic components of traditional employee performance management systems. Based on the case, which of the following is not part of Uber’s performance appraisal system for drivers?

A: Rewards

B: Feedback

C: Expectations

D: Monitoring

E: Punishment

Question 2. Upon starting your new job after college, you've been confronted with selecting the investments for your 401(k) retirement plan. You have four choices for investing your money:

• a money market fund that has historically returned about 0.50% per year.
• A long-term bond fund that has earned an average annual return of 4.0%
• A conservative common-stock fund that has earned 6.0% per year.
• An aggressive common-stock fund that has earned 9.0% per year.

a. If you were to contribute $5,500 per year for the next 35 years, how much would you accumulate in each of the above funds?

b. Now, change your worksheet so that it allows for less than annual investments (monthly, weekly, etc.). The annual investment will be the same, but it will be made in smaller, more frequent, amounts.

Given the following income statement and balance sheet data, select which items would be included in presenting the cash flow from operating activities section of the statement of cash flows using the indirect method:

Assume your firm has multiple investments to consider each with differing risk levels. How can differing risk levels be incorporated into NPV analysis? How can they be incorporated into IRR analysis?

Between 2011 and 2016, Williams purchased a number of household items on credit from the Penguin Furniture Co., a retail furniture store. Penguine retained the right in its contracts to repossess an item if Williams defaulted on an installment payment. Each contract also provided that each installment payment by Williams would be credited pro rata to all outstanding accounts or bills owed to Penguin. As a result of this provision, an unpaid balance would remain on every item purchased until the entire balance due on all items, whenever purchased, was paid in full. Williams defaulted on a monthly installment payment in 2016, and Penguin sought to repossess all the items the Williams has purchased since 2011.

1. Is the bargaining power of Penguin too great to assume that the terms of the agreement resulted from a fair negotiation process?

2. Do the terms of this agreement appear fair and reasonable to both parties?

3. Has Penguin acted unethically?

XYZ just paid a dividend of $ 2.65 on its shares. The dividend growth rate is expected to be constant 4% per annum forever. Investors demand a return of 16% for the first three years, a return of 14% for the next three years and a return of 11% thereafter. What is the current price of this financial instrument?

1. Kendall Corners Inc. recently reported net income of $3.9 million and depreciation of $585,000. What was its net cash flow? Assume it had no amortization expense. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.

2. In its most recent financial statements, Del-Castillo Inc. reported $30 million of net income and $910 million of retained earnings. The previous retained earnings were $904 million. How much in dividends did the firm pay to shareholders during the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.

3.

The Shrieves Corporation has $15,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 8.5%, state of Florida muni bonds, which yield 4% (but are not taxable), and AT&T preferred stock, with a dividend yield of 7%. Shrieves' corporate tax rate is 35%, and 70% of the dividends received are tax exempt. Find the after-tax rates of return on all three securities. Round your answers to two decimal places.

4.

The Moore Corporation had operating income (EBIT) of $700,000. The company's depreciation expense is $140,000. Moore is 100% equity financed, and it faces a 40% tax rate.

What is the company's net income?

Assuming no changes to any of the Balance Sheet accounts, what is its net cash flow?

TIE AND ROIC RATIOS

The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 12%. In addition, it has $600,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.56 million, its average tax rate is 40%, and its profit margin is 3%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places.

TIE :

ROIC:  %

1. Given the following set of cash flows for a project, calculate the Payback, Discounted Payback and Accounting Rate of Return. Assume a cost of capital of 10%. Assuming that this is an independent project, should the project be accepted? Why or why not?

Year                Cash Flow                 Net Profit                   Depreciation

0                    -$125,000

1                    $22,000                     $15,000                      $10,000

2                    $58,000                     $43,000                      $25,000

3                    -$30,000                   $24,000                      $21,000

4                    $35,000                     $28,000                      $18,000

5                    $28,000                     $20,000                      $15,000

6                    $60,000                      $52,000                      $11,000

And now Construct an NPV profile for the project above and explain what you find.

THE SETUP AND KEY INPUTS:                                                                   

Your best friend James just celebrated his 25th birthday and wants to start saving for his anticipated retirement. James plans to retire in 35 years and believes that he will have 25 good years of retirement (he has looked at the life expectancy tables and is playing the odds here) and believes that if he can withdraw $130,000 at the end of each year, he can enjoy his retirement. In this problem, assume that the full 25 years of retirement payments are made, and the account has a zero balance at the end.

Assume that a reasonable rate of interest for James for all scenarios presented below is 8% per year. This is an annual rate, review each individual question for more specifics on compounding periods per year.

Because James is planning ahead, the first withdrawal will not take place until one year after he retires. he wants to make equal annual deposits into his account for his retirement fund.                   

Hints: Picture the problem like this: We invest for retirement over our working lives and then we withdraw set amounts each year during retirement. Note that there are two different periods in the following timeline, N1 years for investing and a different N2 for the retirement period. In all parts of the problem the annual interest rate is 8%, whether you are looking at the investment or the retirement time periods.

|---------------------------------------------------------------------|---------------------------------------------------|

|                                Investment period, investing X$ every period                    Retirement period, receiving Y$ and having $0 at the end      |

For each question, add blank lines as needed to provide your solution.

A. If he starts making these deposits in one year and makes his last deposit on the day he retires, what amount must James deposit annually to be able to make the desired withdrawals at retirement?

A1) First: Amount James needs to have saved as of his retirement (3 pts):

A2) The amount James must save each year (beginning at the end of the first year) to fund his retirement is (3 pts):    

A3) If James decides to make monthly deposits for 35 years to reach his same retirement goal, how much must James start depositing one month from today (3 pts)?                                                                

B. If James decides he isn’t earning enough money yet and wants to wait several years before starting his investment deposits. Assume that instead of starting immediately (that is, the end of year 1), James waits for 10 years (first deposit at the end of year 10) leaving 10 fewer years (than the original plan of 35 years) to grow his retirement nest egg, what amount must he deposit annually to be able to make the desired withdrawals at retirement (4 pts)?           

C. Suppose your friend has just inherited a large sum of money. Rather than making equal annual payments for 35 years, he has decided to make one lump sum deposit today to cover his retirement needs. What amount does he have to deposit today? (3 pts)   

Use the Black-Scholes formula to the value of a call option given the following information:

T= 6 months

standard deviation=25%

Exercise price= 50

Stock price=50

Interest rate= 2%

• 3.75
• 2.87
• 3.11
• 3.63

Use the information in the previous question to find the value of a six month put option on the same stock with an exercise price of 50. Round intermediate steps to four decimals and round your final answer to two decimals.