You are the CEO of a privately held company. Your company has a project regarding the development and marketing of a new product. The project requires an initial investment (at t=0) of $100m, and will generate a payoff only during the following period, t=1. The payoff at t=1 is random, and depends on your marketing strategy at that time. In particular, you will be able to follow either a conservative strategy (strategy C) or an aggressive strategy (strategy A). Payoffs under the two strategies are given by:

Payoff from strategy C: 150m (probability 50%) 110m (probability 50%)
Payoff from strategy A: 200m (probability 50% 30m (probability 50%)

The strategy you will choose remains private information to you. You have 20m cash, and you must raise the $80m required for the initial investment with outside financing. The appropriate discount rate for this project is the risk-free rate, which is zero.

You first consider a bank loan. What is the promised payment F (principal plus interests) that a rational banker, aware of your incentives, will ask to loan you the $80m you need? (Hint: you need determine which strategy the firm will follow if it is debt-financed…) Before signing up for a loan, you also check with an investment banker about issuing equity in an IPO. The banker advises you that if you wish to issue equity in an IPO you should expect to sell shares at 20% discount with respect to their fair market value. What fraction of the firm must you sell to receive the desired $80m financing?

Which alternative do you prefer: the bank loan or the IPO? Explain your results. How your answer would change if you are able to sell equity in the IPO at a 10% discount?

The Ambivalent CEO of the Construction Company

jim Symanski, 55, owns a construction company in the Northeast. Despite the slowed economy in his part of the country, jim has been able to maintain his company's substantial profitability as a result of selective bidding, minimal debt, and other good management techniques.

Even though his business is very successful, jim is completely at a loss over what to do about two sons in the business. Alan and Harry, both in their mid-30s, have each begun to press their father for an opportunity to lead the company. But jim has taken no action, and his sons have begun to believe that he has no appreciation for their contribution to the success of the company. The sons also see jim as passive and indecisive, qualities they resent.

Although Alan and Harry have both demonstrated solid technical expertise over the years, their management skills have not been tested. jim is just not sure what their leadership capabilities are. But more than that, they are the children from his first marriage—to a woman whose alcohol abuse left scars on jim and his entire family.

jim is happily remarried, and children from the second marriage are beginning to push for roles in the company. jim is afraid that giving Alan and Harry stronger roles will result in anxiety in his new family. But he's just as sure that not doing so will escalate the tension between jim and his older sons as well as reopen wounds from the first marriage.

jim regrets his inability to act—it reminds him of his frustration with his own father, who seemed equally indecisive when jim worked for him in another business. jim wants to please everyone and avoid a further split in the family.

Consider the desirable attributes and interests of next-generation successors. Can jim make a decision on how the future of his company based on these as they relate to Alan and Harry?

Suppose the following graph is the current condition of the U.S. economy.

Answer the following questions based on this graph.

1. (10 points) Based on the graph, what type of gap is the U.S. economy experiencing?
2. (40 points) From the Keynesian View—
   a. Is the issue on the demand or supply side of the economy?
   b. What government actions would be recommended?
   c. According to the Phillips curve, what would happen to the price level if we pursue policies to lower unemployment?
   d. What did Keynes mean by “sticky prices”?
3. (30 points) From the Neoclassical View—
   a. What change needs to happen in our graph to bring the U.S. economy back to potential output?
   b. How will this happen?
   c. Would this lead to more or less inflation that the Keynesian actions?
4. (10 points) From 2007-2009 the US experienced one of its worst economic collapses. Which approach did the U.S. government follow in regards to the economy—Keynesian or Neoclassical?
5. (10 points) In Spring 2020, the U.S. economy once again found itself in an economic crisis, this time due to the COVID-19 pandemic. Which approach did the U.S. government follow in regards to the economy—Keynesian or Neoclassical?

You are graduating in May 2020 with a B.S. and want to attend graduate school full time for two years for an MBA. Though scholarships, support from your parents, and savings, you don’t have any debt for your undergraduate education, and you've agreed to pay for graduate school on your own. You estimate that you will need to borrow about $40,000 in each of the next two years: $40,000 in August 2020 and $42,000 in August 2021. The term of each loan will be 15 years, paid monthly. Your first payment will be due October 1, 2020 and the first payment of the second loan will be due October 2, 2021. You’ve researched student loans and found the following rates that are guaranteed not to be any higher over the next 20 years: Direct unsubsidized loans – capped at $20,500 @6.08% for fifteen years Direct PLUS loans @ 7.08% for fifteen years There are also origination fees – that are subtracted from the loan amount you receive but does not affect the principal or monthly payment. The rates are: Direct unsubsidized loans: 1.059% Direct PLUS loans: 4.236% Question 1 1 Point How much money do you expect to receive in August 2020? Question 2 1 Point How much money do you expect to receive in August 2021? Question 3 1 Point What will be the remaining principal in October 2020? Question 4 1 Point What will be the remaining principal in November 2021? Question 5 1 Point What is the total monthly payment in August 2020? Question 6 1 Point What is the total monthly payment in July 2025? Question 7 1 Point What is the remaining principal in August 2028? Question 8 1 Point How much do you expect to pay in total for both loans? Question 9 1 Point What is the effective simple interest rate for the Direct unsubsidized loans: (interest + Origination fees)/(Loans)? Question 10 1 Point What is the effective simple interest rate for the Direct PLUS loans (interest + Origination fees)/(Loans)

Read the case study below and answer ALL questions that follow.
Alibaba’s New Chairman Says He Has to Reinvent Retail Before Someone Else Does By Peter Elstrom and Lulu Yilun Chen September 9, 2019, 6:01 AM GMT+2
For months, Daniel Zhang huddled with a small team in an underground garage in Shanghai. The chief executive of Alibaba Group Holdings Ltd. was working on a secret plan that would sound crazy even to many of his own colleagues 100 miles away in Hangzhou. Zhang wanted to launch a startup inside the e-commerce giant that would combine a grocery store, a restaurant, and a delivery app, using robotics and facial recognition to speed up logistics and payment. That project, Freshippo, has since become a major part of Zhang’s blueprint for Alibaba’s future, with 150 stores (and counting) across 17 Chinese cities. On a recent weekday afternoon at a store in Hangzhou, plastic bins shuttle automatically along tracks in the ceiling, collecting goods from around the store for online orders. Deliverymen stand by to transport the goods anywhere within a 1.9-mile radius in as little as 30 minutes.
Zhang is the little-known 47-year-old with the unenviable task of stepping into the shoes of China’s most famous businessman. On Sept. 10 he’ll add the title of chairman of Alibaba after assuming the CEO role in 2015, and he’ll be the first person since co-founder Jack Ma to hold both positions at the same time. Ma is a global figure known for hobnobbing with heads of state and for his fiery speeches at gatherings such as the World Economic Forum. Zhang is slight and soft-spoken, often proceeding haltingly in English during calls with investors. Even in China, he’s largely unknown. At Alibaba headquarters, an employee’s parent mistook him for the janitor.
Yet in his understated way, Zhang is proving as radical as his predecessor. He says Alibaba is uniquely positioned to pull together the online and offline worlds in groceries and beyond, and dozens of his new initiatives are leading Alibaba deeper into fields including finance, health care, movies, and music. Especially in the U.S., where the company’s shares trade, these efforts have baffled some investors, who worry about overreach. In Zhang’s view, they’re a matter of survival. “Every business has a life cycle,” he says during an exclusive interview at Alibaba’s Hangzhou headquarters. “If we don’t kill our existing business, someone else will. So I’d rather see our own new businesses kill our existing business.”
MODULE OPERATION MANAGEMENT IN SUPPLY CHAIN MANAGEMENT
TOTAL MARKS 20 MARKS
1   
Alibaba’s online marketplace made it China’s largest public company, with a market value of about $460 billion, but recent months have provided several signs of strain. China’s economic growth is slowing, squeezing consumer spending and advertising. Investors have pushed down the company’s share price. And protests in Hong Kong forced the delay of a stock offering that could have raised $20 billion. “He’s got to find new seeds for revenue growth,” says Mitchell Green, managing partner of Alibaba investor Lead Edge Capital. “He’s planting a lot of seeds.”
Born and raised in Shanghai, Zhang followed the path of his accountant father to Shanghai University of Finance and Economics. Early in his career, he saw up close how quickly established institutions can vanish. He was interviewing at Barings Bank when one trader lost more than $1 billion and took the 233-year-old institution under. Instead, he became an auditor at the Chinese affiliate of Arthur Andersen, and was working in the satellite office when Andersen went down in connection with the Enron accounting-fraud scandal.
“This is a very funny story,” he says, with the comic timing of a man who loves bookkeeping jokes. “After I joined Arthur Andersen, I had a joke with him. I said, ‘For many years, you didn’t want me to be an accountant. Then I became an auditor.’ I was never an accountant for even one day.”
Zhang later became chief financial officer at game developer Shanda Interactive, at the time the largest internet company in China. That’s where Alibaba Vice Chairman Joseph Tsai, the next-most influential cofounder after Ma, found Zhang in 2007. “Daniel really understands business,” says Tsai, who recently plunked down $3.5 billion, about a third of his wealth, to buy control of the Brooklyn Nets. “You can’t disrupt unless you really understand what you’re trying to disrupt.”
It was at Alibaba that Zhang truly distinguished himself. When he joined, the company’s hottest website was Taobao, an EBay lookalike that was losing money and full of phony goods. “When I looked at the financial statement, oh Jesus,” Zhang says. “Revenue? Zero. Bottom line? A lot of losses. Then I moved to the balance sheet, even worse.”
Starting in 2008, Zhang took over the development of Tmall, an online marketplace more like Amazon.com Inc.’s that’s now Alibaba’s most lucrative operation. To attract brand names to the site, he furnished top merchants with new levels of information on their customers: who was buying what, where they lived, which kinds of ads worked best. Sales boomed, and Zhang slowly coaxed global brands such as Procter & Gamble Co.’s Tide and SK-II into selling online in China. He showed Alibaba was serious about fighting fakes by installing software to detect copycats, and by giving companies a hotline to report violations. P&G estimates that only about 1% of goods carrying its brands on Alibaba sites are counterfeit on average, though Taobao remains on the U.S. government’s list of “notorious markets” rife with copyright infringement.
In 2009, Zhang and his team created Singles’ Day, an annual deals-fest that coincides with a relatively obscure Nov. 11 celebration of singlehood. Zhang spent months pushing merchants to get on board, then oversaw sales, promotions, and items to be featured on key webpages. Sales hit $135 million the second year, then $5.8 billion in Year 5. Last year the total hit $31 billion, far beyond the U.S.’s big shopping holiday, Black Friday.
The momentum from Tmall and Singles’ Day “basically made the company the retail giant that it is today,” says Duncan Clark, author of Alibaba: The House That Jack Built. Jerry Yang, a member of Alibaba’s board and a co-founder of Yahoo! Corp., says Zhang’s low-key style is a plus. “Daniel’s results speak louder than words,” says Yang. “He’s all about execution.”
Subsidiaries such as Freshippo are part of what Alibaba is calling, optimistically, “new retail.” The combo stores were conceived by Freshippo CEO Hou Yi, who was planning to create the company on his own when he met with Zhang in 2014. Over coffee, Zhang persuaded him to join Alibaba instead and gave him $100
2
million to start with no expectations of profits for the first two years. “Then I knew how determined he was,” says Hou. “This is the equivalent of Daniel’s second startup. He said after so many years, he finally saw a project that could surpass Tmall.” Only now is Hou working out a business model.
Freshippo is far from a guaranteed success. Margins are woefully thin in the grocery business, and several well-funded startups are competing with Zhang’s effort. An Alibaba delivery venture called Ele.me is also bleeding money in its battle against Meituan. Wang Xing, Meituan’s founder, told Bloomberg Businessweek earlier this year that Alibaba wouldn’t be able to keep up the fight into 2020. Zhang says he’s wrong, and that Alibaba is determined to take at least 50% of the market in food delivery to obtain an advantage in related businesses, such as digital-payments services. Expansion abroad may be the biggest challenge. Ma pledged that Alibaba would one day generate at least half its revenue from outside China, a target Zhang says he’ll pursue. But foreign sales are far from the goal, and gains are proving expensive. Alibaba has already sunk $4 billion into Singapore’s Lazada Group to expand in Southeast Asia, but it has struggled in key markets such as Indonesia. In March, Lazada got its third CEO in nine months.
While Alibaba’s spending raised few questions as consumer demand surged in China and capital markets rallied, it’s looking tougher to maintain. The company’s shares more than tripled from the time Zhang took the CEO role in September 2015 through June of last year. Since then, they’ve lost 15% of their value.
The new initiatives take a toll on Zhang, too. Even by the standards of China’s tech industry, which views working “996”—9 a.m. to 9 p.m., six days a week—as normal, his schedule is intense. During the week in Hangzhou, it amounts pretty much to work, eat, and sleep, according to a former colleague. On weekends, Zhang usually meets two or three CEOs. Besides trying to out-hustle his rivals, he’s also got to contend with the memory of Ma; successors to iconic chief executives often get pushed aside when the business hits a rough patch and nostalgia sets in. “It’s always hard to follow founders,” says Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management. “It’s even harder when you’re following someone with global stature.” —With Philip Glamann   
Source: https://www.bloomberg.com/news/articles/2019-09-09/alibaba-s-new-chair-says-he-ll-find-the-wayto-kill-his-business   
1.1 REQUIRED: Answer each of the following questions:
“For months, Daniel Zhang huddled with a small team in an underground garage in Shanghai. The chief executive of Alibaba Group Holdings Ltd. was working on a secret plan that would sound crazy even to many of his own colleagues 100 miles away in Hangzhou. Zhang wanted to launch a startup inside the e-commerce giant that would combine a grocery store, a restaurant, and a delivery app, using robotics and facial recognition to speed up logistics and payment. That project, Freshippo, has since become a major part of Zhang’s blueprint for Alibaba’s future, with 150 stores (and counting) across 17 Chinese cities.”
In light of the above observation, identify and critically discuss the strategy underpinning the “new retail” that Alibaba Group Holdings Ltd. is pursuing under Daniel Zhang, the chief executive and chairman. In your discussion, highlight the main characteristics of the strategy as well as a brief SWOT analysis of Alibaba, using the information provided in the article. 1.2 Yet in his understated way, Zhang is proving as radical as his predecessor. He says Alibaba is uniquely positioned to pull together the online and offline worlds in groceries and beyond, and dozens
3
of his new initiatives are leading Alibaba deeper into fields including finance, health care, movies, and music. Especially in the U.S., where the company’s shares trade, these efforts have baffled some investors, who worry about overreach. In Zhang’s view, they’re a matter of survival. “Every business has a life cycle,” he says during an exclusive interview at Alibaba’s Hangzhou headquarters. “If we don’t kill our existing business, someone else will. So I’d rather see our own new businesses kill our existing business.” Based on the above extract, Alibaba’s new chairman appears to be implementing a strategy meant to reinvent retail as a matter of survival. Identify and critically discuss any TWO (2) types of managerial strategic decisions that could be used by Alibaba to “kill [its] existing business,” innovate its operations and optimise its offerings. As part of your discussion, define and explain the two strategic decisions you have identified and highlight the potential role they could play in Daniel Zhang’s bundle of new initiatives which are “leading Alibaba deeper into diverse fields such as finance, health care, movies, and music.”

which of the following is not related to genetic drift?

neutral variation

sexual selection

non darwinian evolution

bottleneck effect

founder effect

Farmer Inc. began business on January 1, 2019. Its pretax financial income for the first 2 years was as follows:

                              2019                                  $340,000

                              2020                                    760,000

The following items caused the only differences between pretax financial income and taxable income.

1.    In 2019, the company collected $420,000 of rent; of this amount, $140,000 was earned in 2019; the other $280,000 will be earned equally over the 2020–2021 periods. The full $420,000 was included in taxable income in 2019.

2.    The company pays $20,000 a year for life insurance on officers.

3.    In 2020, the company terminated a top executive and agreed to $90,000 of severance pay. The amount will be paid $30,000 per year for 2020–2022. The 2020 payment was made. The $90,000 was expensed in 2020 for financial reporting purposes. For tax purposes, the severance pay is deductible as it is paid.

4. The company purchased a large asset in 2019 for $60,000. The depreciation will be computed using a five-year life. For tax purposes, the company will be able to deduct half of the cost in 2019 and in 2020.

The enacted tax rates existing on December 31, 2019, are:

               2019                     30%                                      2021                     40%

               2020                     35%                                      2022                     40%

Instructions:

(a)      Determine taxable income for 2019 and 2020.

(b)      Determine the deferred income taxes at the end of 2019, and prepare the journal entry to record income taxes for 2019.

(c)      Prepare a schedule of future taxable and (deductible) amounts at the end of 2020.

(d)      Prepare a schedule of the deferred tax (asset) and liability at the end of 2020.

(e) Compute the net deferred tax expense (benefit) for 2020.

(f)       Prepare the journal entry to record income taxes for 2020.

P14–19Ethics Problem Assume that you are the CFO of a company contemplating a stock repurchase next quarter. You know that there are several methods of reducing the current quarterly earnings, which may cause the stock price to fall prior to the announcement of the proposed stock repurchase. What course of action would you recommend to your CEO? If your CEO came to you first and recommended reducing the current quarter’s earnings, what would be your response?

Mackenzie Dell graduated from university six years ago with an undergraduate degree in finance. Although she is satisfied with her current job, her goal is to become aninvestment banker. She feels that an MBA degree would allow her to achieve her goal. After examining schools, she has narrowed her choice to either Maple Leaf University or Stars and Stripes University. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Mackenzie currently works at the money management firm of Copper Sachs. Her annual salary at the firm is $68,000 per year, expected to increase at 2.5 percent per year until retirement. She is currently 28 years old and expects to work for 35 more years. Her current job includes a fully paid health insurance plan, and her current average tax rate is 26.5 percent. Mackenzie has a savings account with enough money to cover the entire cost of her MBA program. The Faculty of Management at Maple Leaf University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $55,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Mackenzie expects that after graduation from Maple Leaf, she will receive a job offer for about $110,000 per year, with a $15,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, her average income tax rate will increase to 30 percent. The School of Business at Stars and Stripes University began its MBA program 16 years ago and is less well known than Maple Leaf University's Faculty of Management. Stars and Stripes University offers an accelerated, one-year program, with a tuition cost of $85,000 to be paid upon graduation. Books and other supplies for the program are expected to cost $4,500. Mackenzie thinks that she will receive an offer of $90,000 per year upon graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.25 percent per year. Her average tax rate at this level of income will be 28.5 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Mackenzie also estimates that room and board expenses will cost $2,000 more per year at both schools than her current expenses, payable at the beginning of each year. The appropriate discount rate is 6.5 percent. 1. What other, perhaps non-quantifiable, factors affect Mackenzie's decision to get an MBA? 2. Assuming all salaries are paid at the end of each year, which is the best option for Mackenzie—from a strictly financial standpoint. 3. Suppose, instead of being able to pay cash for her MBA, Mackenzie must borrow the money. The current borrowing rate is 4.8 percent. How would this affect her decision? It would be great help if excel exhibits could also be provided.

Ariel Sunnyvale graduated from university six years ago with an undergraduate degree in finance. Although she is satisfied with her current job, her goal is to become an investment banker. She feels that an MBA degree would allow her to achieve her goal. After examining schools, she has narrowed her choice to either Northern University or Southern University. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ariel currently works at the money management firm of Greyson Partners. Her annual salary at the firm is $64,000 per year, expected to increase at 2.75 percent per year until retirement. She is currently 30 years old and expects to work for 37 more years. Her current job includes a fully paid health insurance plan, and her current average tax rate is 25 percent. Ariel has a savings account with enough money to cover the entire cost of her MBA program. The Faculty of Management at Northern University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $50,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Ariel expects that after graduation from Northern, she will receive a job offer for about $88,000 per year, with a $5,000 signing bonus. The salary at this job will increase at 3 percent per year. Because of the higher salary, her average income tax rate will increase to 27 percent. The School of Business at Southern University began its MBA program 16 years ago and is less well known than Northern University's Faculty of Management. Southern University offers an accelerated, one-year program, with a tuition cost of $80,000 to be paid upon graduation. Books and other supplies for the program are expected to cost $4,500. Ariel thinks that she will receive an offer of $100,000 per year upon graduation, with an $15,000 signing bonus. The salary at this job will increase at 3.5 percent per year. Her average tax rate at this level of income will be 28.5 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ariel also estimates that room and board expenses will cost $2,000 more per year at both schools than her current expenses, payable at the beginning of each year. The appropriate discount rate is 6.5 percent.

1. What other, perhaps non-quantifiable, factors affect Ariel's decision to get an MBA?

2. Assuming all salaries are paid at the end of each year, which is the best option for Ariel—from a strictly financial standpoint.

3. Suppose, instead of being able to pay cash for her MBA, Ariel must borrow the money. The current borrowing rate is 3.75 percent. How would this affect her decision?