THE MBA DECISION

Ben Bates graduated from college six years ago with a finance undergraduate degree. Since graduation, he has been employed in the finance department at East Coast Yachts. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. 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.

Ben’s annual salary at East Coast Yachts is $57,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program.

page 129The Ritter College of Business at Wilton 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 $63,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,500 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $105,000 per year, with an $18,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent.

The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $3,500. Ben thinks that after graduation from Mount Perry, he will receive an offer of $88,000 per year, with a $15,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average income tax rate at this level of income will be 29 percent.

Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.1 percent. Assume all salaries are paid at the end of each year.

1. How does Ben’s age affect his decision to get an MBA?

2. What other, perhaps nonquantifiable factors, affect Ben’s decision to get an MBA?

3. Assuming all salaries are paid at the end of each year, what is the best option for Ben—from a strictly financial standpoint?

4. In choosing between the two schools, Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

5. Suppose that instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision to get an MBA?

In order to address the course learning objective. "...demonstrate your ability to justify if current Corporate Strategies work to achieve competitive advantage'..."

An eBay executive was once asked a question about some of the firm's new acquisitions. The question and his answer follows:

Q - With your other acquisitions, what have you learned about how to make them work, how to integrate them into the culture?

A - We think about acquisitions in three categories: acquisitions to strengthen our core, adjacent acquisitions, and capability acquisitions. The easiest are the first kind, like the acquisition two years ago of (the Korean auction site) Gmarket. We’re letting adjacent acquisitions, such as StubHub and Bill Me Later, run relatively independently. With Bill Me Later we’ve integrated core capabilities into PayPal and eBay. Positronic, a small search company, is in the third category. In many cases we’re buying the people—Christopher Payne, who’s running eBay North America now, was a founder of Positronic—which helps us integrate faster and acquire great talent.

---

Now it is your turn. Please address the following questions:

1. What benefits would eBay have from allowing an acquired firm, such as "Bill Me Later" to function relatively independently?
2. Is it a good idea to impose the acquiring firm’s culture onto the acquired firms? Why? Why not?   

Econ 335: Assignment 4

Due: April 20^th by 11:59 PM

1.     To protect American jobs, the US government may decide to cut US imports of bulldozers by 60%. It could do so by either:

-Imposing a tariff high enough to cut bulldozer imports by 60%

-Persuading Komatsu and other foreign bulldozer makers to set up a voluntary export restraint arrangement to cut their exports of bulldozers to the US by 60%.

a. Which of these two policies would be less damaging to the United States as a whole? Please explain. (6 points)

b. Which of these two policies would be less damaging to foreign bulldozer manufacturers? Please explain. (6 points)

c. Which of these two policies would be most beneficial for the United States’ government? Please explain. (6 points)

2. A small country imports sugar. With free trade, the world price of sugar is $0.20 per pound. The country’s national market for sugar with free trade is:

-Domestic production: 120 million pounds/year

-Domestic consumption: 420 million pounds/year

-Imports: 300 million pounds/year

The country’s government now decides to impose a quota that limits sugar imports to 240 million pounds per year. With the import quota in effect, the domestic price rises to $0.24 per pound, and domestic production rises to 160 million pounds/year. The government auctions the import licenses for the 240 million pounds of imports.

a.     Please calculate how much domestic producers gain or lose from the quota. (9 points)

b.     Please calculate how much domestic consumers gain or lose from the quota. (9 points)

c.     Please calculate how much the government receives for the auction for the import licenses. (9 points)

d.     Please calculate the net national gain or loss in surplus in the small country from the quota. (9 points)

3. With the election of Donald Trump as President of the United States, his pledge to renegotiate or discard the North American Free Trade Agreement (NAFTA) may be a key element of his economic policy. Some of the states where he performed better than expected, including Pennsylvania, Michigan, and Ohio, are termed “Rust Belt” states. These states have seen their manufacturing sectors shrink significantly since the 1980s, which some economists blame in part on NAFTA and trade with other countries.

a. If NAFTA is discarded, and tariffs are increased on products from Mexico, Canada, and other countries, what would be the effect on producers in the United States that competed with foreign competition? In your response, consider the effect of tariffs on prices and producer surplus. (6 points)

b. Can increasing tariffs actually help the US economy overall? Explain. (6 points)

c. Will discarding NAFTA necessarily hurt the US economy? Explain. (5 points)

1. Do the variables have significant correlation? For full credit, you must show each step of the hypothesis test. Use the 0.05 significance.

2. In 2008, the price of gas dropped drastically and hit a low average of $1.59 for the nation. What effect do you think this will have on the alternative-fuel car sales, if any? Do you think that this would affect the number of alternative-fueled vehicles used in the United States? Do you think that it would follow the same pattern as before 2008? Write 2 or 3 sentences explaining how you think the new vehicles will affect the number of alternative-fueled vehicles in the United States.

3. Use your regression equation to predict the number of alternative-fueled vehicles used in the United States in 2010. Assume that the pattern remains the same after the introduction of the electric-gas vehicles. Show your work.

4. Search online to find some evidence for or against your opinion in part e. Give the information that you found and state the URL to the data. Was your prediction correct or incorrect? Why do you think that happened? Write 2 or 3 sentences summarizing the information that you found and explain why you think that happened. Be sure to answer each question.

From a previous Chapter there is a discussion of variable costing and absorption costing. Now, consider the following scenario:

Assume that you are a cost accountant in a small manufacturing firm. You are member of the Institute of Management Accountants (IMA) and have recently become a Certified Management Accountant (CMA).

The firm’s stock is publicly-traded on the New York Stock Exchange. The corporation reports its annual financial statements in conformity with United States generally accepted accounting principles (US GAAP) and prepares its tax returns under United States Treasury regulations.

The company manufactures four unique machines that are distributed throughout the United States. Your primary responsibility within the company is to determine cost of goods sold for the four machines.

During the current year, sales have significantly exceeded production, and inventories have decreased during the year.

As you are preparing cost of goods sold calculations, your supervisor, Ms. Smith, approaches you with a request. Ms. Smith asks you to calculate cost of goods sold for external reporting and for income tax reporting using variable costing.

Required:

1. Explain the impact of complying with Ms. Smith’s request on cost of goods sold and on ending inventories.
2. Would you comply with Ms. Smith’s request? Why or why not?
3. If you determine that you would not comply, what is your course of action? Be specific. (Refer to the Institute of Management Accountants (IMA) "Statement of Ethical Professional Practice" that is included in the Appendix to Chapter 1 of the textbook and is also included under the Resources folder in WT Class.)

1.Carlson, a citizen and resident of Denmark, is a commodities dealer operating in Copenhagen. During the tax year, Carlson, by e-mail from her home office, purchased several carloads of wheat. She took title to the wheat in Minneapolis. The wheat was sold to the government of India, FOB New York City, where the wheat was placed aboard a Liberian flag vessel. Carlson has never been to the United States. While she has occasionally purchased U.S. commodities in the past, this is her sole transaction in the United States during the current year. Does she have any potential U.S. income tax liability? 5. Rosario, a corporation organized in Argentina, sells consumer products to retailers in the main cities of that country. Rosario has no office in the United States.

2.Rosario sales representatives in Argentina send orders to a purchasing agent in New York. The purchasing agent purchases the products from U.S. manufacturers in Rosario’s name. The products are shipped to Miami and delivered to vessels bound for Argentina. Orders are accepted in Argentina. Title to the goods is transferred to customers at the port of destination. However, the customers have agreed contractually to insure against all losses attributable to shipwreck, fire and accident while the goods are in transit. The Argentine customers make payment to an account maintained by Rosario in Switzerland. Does Rosario have any liability for U.S. taxes? Would your answer differ if the purchasing agent is properly characterized as an “independent agent”?

In the United​ States, most healthcare services are produced by private doctors and hospitals that receive their incomes from​ _______.

A.private​ health-insurance, governments, and patients

B.only private​ health-insurance

C.only governments

D.50 percent from private insurance companies and 50 percent from patient expenditure

First, list a few of the derivatives trading platforms in the US and in some of the other advanced economies. Then, briefly discuss at least two (02) such platforms in the United States and in another developed country (or countries), with some recent data. What are your views about these developments in, say, the last decade or so?