In an article in the Journal of Advertising, Weinberger and Spotts compare the use of humor in television ads in the United States and in the United Kingdom. Suppose that independent random samples of television ads are taken in the two countries. A random sample of 400 television ads in the United Kingdom reveals that 141 use humor, while a random sample of 500 television ads in the United States reveals that 119 use humor.

(a) Set up the null and alternative hypotheses needed to determine whether the proportion of ads using humor in the United Kingdom differs from the proportion of ads using humor in the United States.

H₀: p₁ − p₂ (Click to select)≠= 0 versus H_a: p₁ − p₂ (Click to select)=≠ 0.

(b) Test the hypotheses you set up in part a by using critical values and by setting α equal to .10, .05, .01, and .001. How much evidence is there that the proportions of U.K. and U.S. ads using humor are different? (Round the proportion values to 3 decimal places. Round your answer to 2 decimal places.)

(Reject/Do not Reject) H₀ at each value of α; (Click to select)strongextremely strongnonesomevery strong evidence.

(c) Set up the hypotheses needed to attempt to establish that the difference between the proportions of U.K. and U.S. ads using humor is more than .05 (five percentage points). Test these hypotheses by using a p-value and by setting α equal to .10, .05, .01, and .001. How much evidence is there that the difference between the proportions exceeds .05? (Round the proportion values to 3 decimal places. Round your z value to 2 decimal places and p-value to 4 decimal places.)

(Do not reject/Reject)  H₀ at each value of α = .10 and α = .05; (Click to select)somestrongvery strongextremely strongnone evidence.

(d) Calculate a 95 percent confidence interval for the difference between the proportion of U.K. ads using humor and the proportion of U.S. ads using humor. Interpret this interval. Can we be 95 percent confident that the proportion of U.K. ads using humor is greater than the proportion of U.S. ads using humor? (Round the proportion values to 3 decimal places. Round your answers to 4 decimal places.)

95% of Confidence Interval                      [ , ]

(Yes/No) the entire interval is above zero.

Technological factors on a beverage startup company,  identifying trends, and Dig into the trends that matter most and find appropriate evidence to validate and refine your model.

how do you think a potential investor would view a startup company's financial statements? What would the investor be looking for? Give examples.

List three sources of financing that Google used during their startup. When (at which stage) did Google use the financing strategies? Was it proper? Why?

how venture capitalists reduce their risk when investing in startup businesses. Justify your answer citing appropriate examples from Saudi Firms.

Suppose a startup is looking to raise capital for a growing tech company. The founders are presented with term sheets from two different venture capital firms. The following highlights contain the main details and terms contained within each potential deal structure.

Investor A
Investment amount: $4,000,000
Investors: Investor A
Type of Security: Non Participating Preferred Equity
Postmoney Valuation: $9,000,000
Option Pool: 25% of post money value
Liquidation Preference: 1X
Anti-dilution: Weighted Average
Board Structure: Board of 3 members; Investor A holds 1 seat
No Shop Clause: 30 days

Investor B
Investment amount: $6,000,000
Investor Split: $3,000,000 by Investor B and $3,000,000 by Investor C
Security Type: Participating Preferred Equity
Premoney Valuation: $6,000,000
Option Pool: 15% of postmoney value
Liquidation Preference: 1X with 2.5X participating cap
Anti-dilution: Full Ratchet
Board Structure: Board of 3 members; each investor holds 1 seat
Pay-to-play: All investors required to purchase shares during any future down round or forfeit board seat
No Shop Clause: 6 weeks

Suppose the company is sold for $6,000,000. How much money would the founder get if they had signed a deal with Investor B?

What is the minimum amount the company would have to be sold for, in order for Investor A to get more than their $4,000,000 investment back?

Suppose the company is sold for $20,000,000. How much money would Investor A and C (combined) get paid?

Case:

Forty years ago, Starbucks was a single store in Seattle’s Pike Place Market selling premium roasted coffee. Today, it is a global roaster and retailer of coffee with some 21,536 stores, 43 percent of which are in 63 countries outside the United States. China (1,716 stores), Canada (1,330 stores),

Japan (1,079 stores), and the United Kingdom (808 stores) are large markets internationally for Starbucks. Starbucks set out on its current course in the 1980s when the company’s director of marketing, Howard Schultz, came back from a trip to Italy enchanted with the Italian coffeehouse experience. Schultz, who later became CEO, persuaded the company’s owners to experiment with the coffeehouse format—and the Starbucks experience was born. The strategy was to sell the company’s own premium roasted coffee and freshly brewed espressostyle coffee beverages, along with a variety of pastries, coffee accessories, teas, and other products, in a tastefully designed coffeehouse setting. From the outset, the company focused on selling “a third place experience,” rather than just the coffee. The formula led to spectacular success in the United States, where Starbucks went from obscurity to one of the best-known brands in the country in a decade. Thanks to Starbucks, coffee stores became places for relaxation, chatting with friends, reading the newspaper, holding business meetings, or (more recently) browsing the web. In 1995, with 700 stores across the United States, Starbucks began exploring foreign market opportunities. The first target market was Japan. The company established a joint venture with a local retailer, Sazaby Inc. Each company held a 50 percent stake in the venture, Starbucks Coffee of Japan. Starbucks initially invested $10 million in this venture, its first foreign direct investment. The Starbucks format was then licensed to the venture, which was charged with taking over responsibility for growing Starbucks’ presence in Japan.

To make sure the Japanese operations replicated the “Starbucks experience” in North America, Starbucks transferred some employees to the Japanese operation. The licensing agreement required all Japanese store managers and employees to attend training classes similar to those given to U.S. employees. The agreement also required that stores adhere to the design parameters established in the United States. In 2001, the company introduced a stock option plan for all Japanese employees, making it the first company in Japan to do so. Skeptics doubted that Starbucks would be able to replicate its North American success overseas, but by June 2015, Starbucks had some 1,079 stores and a profitable business in Japan. After Japan, the company embarked on an aggressive foreign investment program. In 1998, it purchased Seattle Coffee, a British coffee chain with 60 retail stores, for $84 million. An American couple originally from Seattle had started Seattle Coffee with the intention of establishing a Starbucks-like chain in Britain. In the late 1990s, Starbucks opened stores in Taiwan, Singapore, Thailand, New Zealand, South Korea, Malaysia, and—most significantly— China. In Asia, Starbucks’ most common strategy was to license its format to a local operator in return for initial licensing fees and royalties on store revenues. As in Japan, Starbucks insisted on an intensive employee-training program and strict specifications regarding the format and layout of the store. By 2002, Starbucks was pursuing an aggressive expansion in mainland Europe. As its first entry point, Starbucks chose Switzerland. Drawing on its experience in Asia, the company entered into a joint venture with a Swiss company, Bon Appetit Group, Switzerland’s largest food service company. Bon Appetit was to hold a majority stake in the venture, and Starbucks would license its format to the Swiss company using a similar agreement to those it had used successfully in Asia. This was followed by a joint venture in other countries. The United Kingdom leads the charge in Europe with 808 Starbucks stores. By 2014, Starbucks emphasized the rapid growth of its operations in China, where it had 1,716 stores and planned to roll out another 500 in three years. The success of Starbucks in China has been attributed to a smart partnering strategy. China is not one homogeneous market; the culture of northern China is very different from that of the east, and consumer spending power inland is not on par with that of the big coastal cities. To deal with this complexity, Starbucks entered into three different joint ventures: in the north with Beijong Mei Da coffee, in the east with Taiwan-based UniPresident, and in the south with Hong Kong-based Maxim’s Caterers. Each partner brought different strengths and local expertise that helped the company gain insights into the tastes and preferences of local Chinese customers, and to adapt accordingly. Starbucks now believes that China will become its second-largest market after the United States by 2020.

Question:

2. Many would argue that Starbucks coffee is expensive, and yet customers get “value” for their money. How do you think Starbucks has been able to transfer this business model and value proposition to international markets?

Case:

Forty years ago, Starbucks was a single store in Seattle’s Pike Place Market selling premium roasted coffee. Today, it is a global roaster and retailer of coffee with some 21,536 stores, 43 percent of which are in 63 countries outside the United States. China (1,716 stores), Canada (1,330 stores),

Japan (1,079 stores), and the United Kingdom (808 stores) are large markets internationally for Starbucks. Starbucks set out on its current course in the 1980s when the company’s director of marketing, Howard Schultz, came back from a trip to Italy enchanted with the Italian coffeehouse experience. Schultz, who later became CEO, persuaded the company’s owners to experiment with the coffeehouse format—and the Starbucks experience was born. The strategy was to sell the company’s own premium roasted coffee and freshly brewed espressostyle coffee beverages, along with a variety of pastries, coffee accessories, teas, and other products, in a tastefully designed coffeehouse setting. From the outset, the company focused on selling “a third place experience,” rather than just the coffee. The formula led to spectacular success in the United States, where Starbucks went from obscurity to one of the best-known brands in the country in a decade. Thanks to Starbucks, coffee stores became places for relaxation, chatting with friends, reading the newspaper, holding business meetings, or (more recently) browsing the web. In 1995, with 700 stores across the United States, Starbucks began exploring foreign market opportunities. The first target market was Japan. The company established a joint venture with a local retailer, Sazaby Inc. Each company held a 50 percent stake in the venture, Starbucks Coffee of Japan. Starbucks initially invested $10 million in this venture, its first foreign direct investment. The Starbucks format was then licensed to the venture, which was charged with taking over responsibility for growing Starbucks’ presence in Japan.

To make sure the Japanese operations replicated the “Starbucks experience” in North America, Starbucks transferred some employees to the Japanese operation. The licensing agreement required all Japanese store managers and employees to attend training classes similar to those given to U.S. employees. The agreement also required that stores adhere to the design parameters established in the United States. In 2001, the company introduced a stock option plan for all Japanese employees, making it the first company in Japan to do so. Skeptics doubted that Starbucks would be able to replicate its North American success overseas, but by June 2015, Starbucks had some 1,079 stores and a profitable business in Japan. After Japan, the company embarked on an aggressive foreign investment program. In 1998, it purchased Seattle Coffee, a British coffee chain with 60 retail stores, for $84 million. An American couple originally from Seattle had started Seattle Coffee with the intention of establishing a Starbucks-like chain in Britain. In the late 1990s, Starbucks opened stores in Taiwan, Singapore, Thailand, New Zealand, South Korea, Malaysia, and—most significantly— China. In Asia, Starbucks’ most common strategy was to license its format to a local operator in return for initial licensing fees and royalties on store revenues. As in Japan, Starbucks insisted on an intensive employee-training program and strict specifications regarding the format and layout of the store. By 2002, Starbucks was pursuing an aggressive expansion in mainland Europe. As its first entry point, Starbucks chose Switzerland. Drawing on its experience in Asia, the company entered into a joint venture with a Swiss company, Bon Appetit Group, Switzerland’s largest food service company. Bon Appetit was to hold a majority stake in the venture, and Starbucks would license its format to the Swiss company using a similar agreement to those it had used successfully in Asia. This was followed by a joint venture in other countries. The United Kingdom leads the charge in Europe with 808 Starbucks stores. By 2014, Starbucks emphasized the rapid growth of its operations in China, where it had 1,716 stores and planned to roll out another 500 in three years. The success of Starbucks in China has been attributed to a smart partnering strategy. China is not one homogeneous market; the culture of northern China is very different from that of the east, and consumer spending power inland is not on par with that of the big coastal cities. To deal with this complexity, Starbucks entered into three different joint ventures: in the north with Beijong Mei Da coffee, in the east with Taiwan-based UniPresident, and in the south with Hong Kong-based Maxim’s Caterers. Each partner brought different strengths and local expertise that helped the company gain insights into the tastes and preferences of local Chinese customers, and to adapt accordingly. Starbucks now believes that China will become its second-largest market after the United States by 2020.

Question:

1. Starbucks prefers a combination approach to foreign market entry: the use of joint ventures and licensing. Do you agree with this approach? Why or why not?

The merger between United Airlines and Continental Airlines. Although the merger was initiated in 2010 many issues still exist today in 2020 related to that merger.

What items of value did Continental bring to the merger that will not be recorded in the acquisition? How will the items of value that Continental brought to the merger in #3 affect future reported income for the combined firm?

Problem 3.  You currently make $100,000 a year and expect your salary increase by 10% a year for 20 years.   You are considering an MBA which will cost you $120,000 for the entire education. If you take the MBA, you will have to pay the full tuition today (all upfront) and you will make zero earnings at the end of years 1 and 2.  However, after graduation you’ll have an opportunity to join a premier investment bank, which promises $130,000 a year, which will grow by 15% for 18 years after graduation.  Is the MBA a good deal? Assume a constant discount rate of 15%.  What if rates fall to 10%?  What if rates rise to 17%, how does your answer change?  Show your detailed spreadsheet calculations (Alt#2). Note: salary is paid at the end of each year.