The CEO of the company claims that the mean work day of the company’s mechanical engineers is less than 8.5 hours. A random sample of 25 of the company’s mechanical engineers has a mean work of 8.2 hours. Assume the population standard deviation is 0.5 hour and the population is normally distributed. At ​​α​​​​ = 0.01, test the CEO’s claim.

• State Ho and Ha and identify the claim.
• State the tail of the hypothesis test.
• State the level of significance.
• State the critical value and explain why you chose a z or a t-test.
• Complete the hypothesis test.
• State your conclusion.
• Discuss the possibility of a Type I or Type II error.

The CEO of Travel the World, Inc. would like to grow the company to $560,500 in sales next year. The finance officer has compiled the data below for the current year. Assets and costs will grow proportionate to sales; debt and equity will not. The dividend payout RATIO will be the same as current year. What is External Financing Needed?

Current Year Data


Sales 480,000
Costs 235,000
Tax rate 21%
Assets 1,400,000
Debt 550,000
Equity 850,000
Dividends 58,880

A company has stores in different countries. The CEO is not sure about the profitability of three stores. The following table includes the revenues and costs of these three stores in the year ended (in euros) :

Should any of the stores be closed as soon as possible? Choose the appropriate decision for each store on the assumption that closing one store will not affect any other stores and total head office costs would not decrease if any of the stores were closed.

1) Paris

close or continue

2) Vienna

close or continue

3) Dublin

close or continue

You are the CEO of a company that has to choose between making a $100 million investment in either Russia or Poland. Both investments promise the same long-run return, so your choice of which investment to make is driven by considerations of risk.

1. Assess the various risks of doing business in each of these nations. Compare Poland and Russia in terms of how easily contracts are enforced, how property rights can be registered, and how investors can be protected. Identify in which area you see the greatest difference.
2. Which investment would you favor and why?

You are the CEO of a midsize, software company in Saudi Arabia and want to take your company global and offer your software worldwide. You will need to open offices in nations around the world. Would you 1) open offices in nations with high political and legal risks or 2) just focus on nations with low political and legal risks? What are the pros and cons for each strategy?

Mr. Brown the CEO of a corporate company wants to know if a new method of rewarding employees influences morale. He gives 12 employees an anonymous survey measuring morale, implements the new method, and then measures morale again after four weeks.

a. State the null and alternative hypotheses

b. State the rejection region

c. Conduct a sign test on the above data

d. What can you conclude?

David is the CEO of FactsNow, Inc. (not a real company), a consumer research and crisis management organization located in Greenville, SC. FactsNow has contracts with several Fortune 500 organizations and has a reputation for uncovering future trends and handling any number of major crises with great success. Recently, David was approached by his friend Jason, who is the vice president of manufacturing for child clothing manufacturer Baby Gaits (also not a real company). Jason told David he needed to speak to him immediately regarding a matter of a "serious nature," and the two agreed to meet for dinner the following evening. Knowing that Jason had recently received a huge bonus and stock options for meeting production cost ceilings, David felt sure that Jason was going to finally give in and buy that lake house that he had always wanted.

During their dinner, Jason revealed that the FDA is about to release a report revealing that Baby Gaits knowingly participates in the practice of manufacturing clothes with legal products that contain levels of cancer causing agents described as "toxic and extremely dangerous." The FDA report is expected to confirm that the practice is not illegal, but that it results in a product that could be extremely dangerous to children. Jason wants to hire FactsNow to assess what steps should be taken to reduce the impact this will have on Baby Gaits' stock price and market share. David needs more information and asks Jason when he first became aware the products used in manufacturing are dangerous. When Jason says he's known for more than three years, David explodes and asks why Jason didn't immediately discontinue the use of these products. Jason explained that he was directed to continue using the products by Baby Gaits' chief operations officer, Linda Watts, even after he had recommended using alternative solutions. Further, Jason stated that he was told by Linda to, "keep this information to himself." David warned Jason that the report will bring with it severe fallout for Baby Gaits stock as well as all of its senior management personnel, and told him he would begin drafting a proposed public relations response. Out of curiosity, David asked Jason if he still continued to allow his children to wear Baby Gaits products, to which Jason replied incredulously, "What do you think?"

David went home and discussed this shocking information with his wife, Annabelle. David told Annabelle he was heading back to his office to begin developing a crisis management approach when Annabelle reminded him that a significant portion of their personal investment portfolio was invested in Baby Gaits' stock. David cringed when reminded, called his broker immediately and ordered him to dump the stock first thing in the morning. David felt bad about this decision since he owned more than 15 percent of Baby Gaits' stock, but knew he had to put his family first.

Three days later, the FDA released the report, which did contain the information Jason and David expected it to contain. Chaos ensued at Baby Gaits and FactsNow as both companies worked to deal with the fallout. During this time, David was pleased with his decision to sell his Baby Gaits holdings as the stock price plummeted to one-tenth of its previous value. Within one week of the FDA's report, lawsuits began trickling in and the Securities and Exchange Commission called and wanted to speak to David about a "serious matter." David cringed thinking back to the last time he had heard that term and wondered what could be next as he picked up the phone to call you, his lawyer.

A. The SEC speaks with you and indicates they believe David may have conducted a transaction in violation of applicable insider trading regulations. Describe insider trading and make a determination as to whether or not David's actions constituted insider trading.

B. David was recently told by Jason that shareholders are suing Linda for violating the actual authority rule. Jason comes to you and asks you what this is. Based on the information provided, did Linda violate this rule? Why or why not?

C. Angry that the SEC is now banging down his door, David is beginning to resent Jason for failing to honor his responsibility to ensure manufacturing is done properly. David comes to you and asks if he can sue Jason for violating the business judgment rule. What is this rule? Did Jason violate this rule? Why or why not?

Assume that you are the CEO of a small publicly traded company. The operating performance of your company has fallen below market expectations, which is reflected in a depressed stock price. At your direction, your CFO provides you with the following recommendations that are designed to increase your company’s return on net operating assets (RNOA) and your operating cash flows, both of which will, presumably, result in improved financial performance and an increased stock price. , LO#2.1 #3.1 1. To improved net cash flows from operating activities, the CFO recommends that your company reduce inventories (raw material, work-in-process, and finished goods) and receivables (through selective credit granting and increased emphasis on collection of past-due accounts). 2. The CFO recommends that your company sell and lease back its office building. The lease will be structure so as to be classified as an operating lease under GAAP. The assets will, therefore, not be iincluded in the computation of the net ooperating assets (NOA), thus increasing RNOA. Evaluate each of the CFO recommendations. In your evaluation consider whether the recommendation will positively impact the operating pperformance of your company or whether it is cosmetic in nature.

You are the CEO of a large battery company that has a long and famous history in the design, manufacture, and distribution of different types of batteries that are used in a growing variety of industries. Your company is organized into two strategic business units.
One business unit (Business Unit 1) specializes in high-end batteries for critical systems. Some of your best known batteries are used to power cardiac pacemakers (heart implants), kidney dialysis systems, portable diabetes treatment systems, and even space-based life support systems (electronic monitors). Many of these batteries incorporate the use of highly exotic, rare-earth materials whose specific compounds and mixtures are highly proprietary to your company. Your patents (as well as your distinctive way of experimenting with materials) have pretty much given you a lock on this part of the business. These exotic batteries represent the highest form of technology development and refinement that your competitors respect and consider as beyond cutting-edge science. Several executives from the automotive industry have commented that these advanced batteries will do much to boost electric-powered vehicles in the near future, but only if you can scale the business and drive down unit production costs. As such, it has been difficult for other battery companies to imitate what you are doing. As a constant worrier, you feel that your competitive advantage lead-time, while impressive, seems shorter than you would like. Your R&D skills and depth are excellent, but you feel as if your manufacturing process is
missing something, since you have typically experienced a long glide-path in reducing your unit costs with every new battery size.
The other business unit (Business Unit 2) is better known for its well-recognized battery brands that used in long-lasting, conventional lithium-ion and alkaline batteries for a broad range or devices, including watches, cell phones, and even laptop computers. Customers love your batteries because of their long-lasting qualities, but they pay a price premium for your offerings. Unlike that of some of your competitors, your lithium batteries are high-quality and do not pose the same degree of fire hazard in laptop computers and smartphones. The extra safety feature is a tribute to your company’s high ethical standards in development and manufacturing, but it also means that your unit costs will probably remain higher than that of rivals. However, Business Unit 2 is beginning to face growing competitive pressures from other manufacturers who are seeking to erode your sizable market share. You are not excessively worried about your competitors yet, but you realize that the battery industry has become significantly more capital-intensive over the years. Business Unit 2 has significant brand equity that captures much customer loyalty, but here too, you begin to wonder how long you can keep charging a price premium for lithium batteries – especially given the rise of new, ultra-modern manufacturing facilities in the Far East that compete on scale and volume.
A year later, your company has been approached by a smaller battery company (call it X) based in Asia. They approach you with an informal request to begin investigating the possibility of working together on advanced battery technologies. Although you have heard about the company from attending industry conferences in the recent past, you never thought that X was a serious player in the battery or power systems business. Most of the business for X has traditionally come from making standard alkaline batteries that are included in remote controls for television sets, telephone answering machines, small portable electric fans, low-end digital cameras, and other low-cost, mass-produced consumer electronics products. Since X makes standard alkaline batteries for other manufacturers, they really have no brand equity at all, as they have never sold directly to consumers. On the other hand, X just recently completed building a large battery manufacturing facility that is designed to provide a wide range of low-cost batteries to all types of consumer electronics companies. From what you hear at industry conferences, X hopes to serve not only its traditional corporate customer base (portable television manufacturers, phone manufacturers, and digital cameras), but also companies that make high-end digital watches, laptop computers, tablets, and portable DVD players used in long airline flights. X has said nothing about what its new manufacturing facility can do, but there is strong reason to believe that X has the talent and the machinery in place to produce both alkaline and lithium-based batteries. Even more uncertain is how well X can formulate the necessary chemical compounds and mixtures that are needed to produce the right balance of smooth, sustained power flow for long-lasting but stable battery life for higher-end products. Little is known about X’s manufacturing skills as it relates to quality control and battery safety features either. Yet, X is determined to push ahead since it wants to become the battery source to all kinds of businesses. Since most consumer electronics companies are outsourcing non-core operations to improve their own internal measures of financial efficiency, many of them have decided to use X’s batteries rather than to make them on their own. You have also heard rumors that management at X is also anxious to expand beyond the alkaline and lithium business segments to move up the power systems food chain. X’s young CEO even drives a prototype
electric vehicle made by Tesla, but claims that on some day, at some point, he/she could beat Tesla in its own game. Because you have some lingering doubts about the depth and sophistication of X’s management team and technology, you politely decline the opportunity to work with X.
Six months have passed, and you are invited to lunch by a friend and former executive who now works at a medical device electronics firm (call them MECO) that builds external portable diabetes monitoring systems and external portable cardiac defibrillators, as well as high-end implantable cardiac pacemaker devices that are installed in the patient by hospitals and doctors. MECO’s external, portable medical products are designed and sold for the consumer market, not for hospitals or long-stay medical facilities. They are particularly well-suited for consumers who are caring for loved ones in the home, where portable medical devices may be needed as a stopgap measure before emergency help or professional help arrives. (Think portable defibrillators that should be in every section of a high-end steakhouse restaurant!) At the lunch meeting, MECO is interested in purchasing large quantities of your most advanced, proprietary, exotic-material batteries for use in their newly designed, implantable cardiac pacemakers. Having worked for you a long time, your friend knows that you have the best scientific reputation and skills in batteries to back up your products. As the conversation lingers, he/she also tells you that MECO has dramatically improved its power system efficiency and maintenance costs for its external portable defibrillators several quarters ahead of schedule. You asked how they were able to accomplish this, since working with portable medical technology requires a different set of manufacturing skills (e.g., lower cost, long production runs, specialized proprietary techniques) than those used for implantable cardiac products made for use in hospitals (e.g., small-quantity, custom-order, but higher unit-cost production). He/she responds by saying that MECO has contracted out most of their battery manufacturing to a company called X, and that they were instrumental in helping us figure out how to best manage power consumption and drainage issues in electronic devices.
Your friend tells you the following: The alliance is structured in a serial manner whereby X initially provides the battery, and MECO does the rest. Increasingly intrigued and simultaneously perturbed by what you hear, you ask for some more specifics about what this relationship is all about. He/she tells you it works like this: You concentrate your effort on designing the latest medical device technology and focusing all of your efforts on making sure that it can work in a variety of different environments (e.g., climates, temperature, altitude, humidity). Once you have finalized a robust portable defibrillator design, you provide it to X, who in turn manufactures the batteries according to the size, weight, and how long you want the defibrillator to keep running. He/she has visited X’s battery manufacturing facility, and tells you how marveled he/she was: “These people are able to run such a tight ship – their cost management and yield improvement skills are top-notch. The batteries come out perfect without any seams, leaks, dents, or irregularities on the surface. Yet it is difficult to isolate which department within X is responsible for which activity it does. The external coating of the batteries can take a beating. It’s almost like they can coax more out of their equipment without compromising quality. We could not attain the same kinds of battery durability and sustainability in our own factory. It seems like everything related to quality in their facilities is so seamless or interconnected that it is difficult to know where one set of competences end and another begins. I don’t know how they do it, but it’s not obvious that we could duplicate it on our own.” X ships
the batteries directly to you, and is even willing, for an added fee, to build the surrounding surge protectors, voltage regulators, transformers, and a few other components that are integrated with the portable defibrillator’s power system to complete a good deal of the end product. What X cannot do is to design the actual microprocessor “brain” that controls how all of these components are integrated together in the actual medical device.

You have decided to investigate the possibility of working with X on a limited project in the battery field. You think a joint venture would work best with X, and you are willing to contribute management and technical oversight from Business Unit 2. You want to begin working together on a battery that is already mature (for reasons of simplicity, assume it is a lithium-ion battery used for watches and cell phones). In your initial negotiations with X, you propose that they contribute funds to the joint venture that would house a jointly-owned plant in the U.S. so that you don’t have to wait for the battery to be produced and shipped from X’s far-away Asian factory. The negotiating team from X looks at you in a funny way, but in turn, proposes its own counter-offer. X does not want to build a battery factory in the U.S., but in turn has proposed to work with you on a more advanced line of batteries – some of which use exotic, rare earth materials in the core. According to X’s management, they prefer an alliance vehicle “that is not so elaborate and formal like a joint venture.” In fact, they would prefer something along the line of a co-development pact. Keeping your answer short, what would be some of the important points of negotiating with X? What are some key issues that you need to consider? How would you frame them in your proposal? What are some key issues that X is probably considering? How will these issues show up in X’s proposals? (Provide your answer and supporting rationale in a table for both companies using short bullet points.