Harley-Davidson Inc. produces motorcycles, motorcycle parts and related accessories and merchandise in the United States and internationally. It is headquartered in Milwaukee, Wisconsin. Use the following information on Harley-Davidson and five other similar companies to value Harley-Davidson as of December 31, 2004.
	Harley-Davidson Inc. 2004 ($ millions)
Net income	$    889.77
Number of common shares, millions	294.31
Earnings before interest and tax	$ 1,506.16
Tax rate	35.0%
Book value of equity	$ 3,218.47
Book value interest-bearing debt	$ 1,295.44
Total Sales	$ 5,320.45
Total Assets	$ 5,483.29
	Harley-	Arctic		Polaris	Marine	Winnebago
	Davidson	Cat	Brunswick	Industries	Products	Industries
			Comparison of Timberland with Comparable Companies:
			Growth Rates, Financial Risks, Size, Returns
5-year growth rate in sales (%)	15.5	6.2	4.1	6.1	15.5	10.8
5-year growth rate in eps (%)	28.1	11.1	47.1	15.9	25.1	17.2
Interest coverage ratio (x)	60.9	*	8.9	85.1	*	*
Total liabilities to assets (%)	0.4	0.3	0.6	0.5	0.2	0.5
Total assets ($ millions)	5,483	286	4,346	793	110	395
			Indicators of Value
Price/earnings (x)		16.9	17.8	27.8	28.6	18.6
MV firm/EBIT(1-tax rate) (x)		17.3	19.4	24.3	29.0	17.6
MV equity/BV equity (x)		2.8	2.8	8.0	7.7	6.5
MV firm/BV firm (x)		2.8	2.3	7.7	7.7	6.5
Price/sales (x)		0.8	0.9	1.6	2.7	1.2
MV firm/sales (x)		0.8	1.1	1.7	2.7	1.2
	* These companies have little or no interest-bearing debt outstanding.
Tasks to complete:
Step 1 - Compute Mean and Median Values for peer-organizations. (Exclude H/D from the computations.
Step 2 - Present and JUSTIFY your estimates using EACH of the following:.
a- Price/earnings
b- MV firm/EBIT(1 - tax rate)
c - MV equity/BV equity
d - MV firm/BV firm
e - Price/sales (x)
f - MV firm/sales (x)
Step 3 - Present your "estimated indicators of value" in a matrix format.
Step 4 - Present the implied value of HOG common stock per share for each indicator of value in matrix format.
Step 5 - Add a Text Box and present an evaluation of your best analysis for a "fair price" for HD Shares.

Rundle Company makes fine jewelry that it sells to department stores throughout the United States. Rundle is trying to decide which of the two bracelets to manufacture. Cost data pertaining to the two choices follow:

	Bracelet A			Bracelet B
Cost of materials per unit	$	25		$	49
Cost of labor per unit		38			38
Advertising cost per year		8,100			6,400
Annual depreciation on existing equipment		6,300			4,700

Required

1. Identify the fixed costs and determine the amount of fixed cost for each product.

2. Identify the variable costs and determine the amount of variable cost per unit for each product.

3. Identify the avoidable costs and determine the amount of avoidable cost for each product.

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019:

Lionel Corporation
Budgeted Income Statement
For the Year Ending June 30, 2019
($000 omitted)
Sales				$	30,200
Cost of goods sold
Variable	$	13,590
Fixed		3,624			17,214
Gross profit				$	12,986
Selling and administrative costs
Commissions	$	5,436
Fixed advertising cost		906
Fixed administrative cost		2,416			8,758
Operating income				$	4,228
Fixed interest cost					755
Income before income taxes				$	3,473
Income taxes (30%)					1,042
Net income				$	2,431

Since the completion of the income statement, Lionel has learned that its sales agents are requiring a 5% increase in their commission rate (to 23%) for the upcoming year. As a result, Lionel’s president has decided to investigate the possibility of hiring its own sales staff in place of the network of sales agents and has asked Alan Chen, Lionel’s controller, to gather information on the costs associated with this change.

Alan estimates that Lionel must hire eight salespeople to cover the current market area, at an average annual payroll cost for each employee of $80,000, including fringe benefits expense. Travel and entertainment expenses is expected to total $770,000 for the year, and the annual cost of hiring a sales manager and sales secretary will be $235,000. In addition to their salaries, the eight salespeople will each earn commissions at the rate of 10% of sales. The president believes that Lionel also should increase its advertising budget by $670,000 if the eight salespeople are hired.

Required

1. Determine Lionel’s breakeven point (operating profit = 0) in sales dollars for the fiscal year ending June 30, 2019, if the company hires its own sales force and increases its advertising costs. Prove this by constructing a contribution income statement.

2. If Lionel continues to sell through its network of sales agents and pays the higher commission rate, determine the estimated volume in sales dollars that would be required to generate the operating profit as projected in the budgeted income statement.

Breakeven point (in sales dollars): _____________

Contribution Income Statement

Sales ___________

- Variable costs:

Sales commissions _____________

Cost of goods sold ___________=

Contribution margin: ____________

Fixed costs:

Exisiting:____________

+Incremental: ___________=____________

Operating income; _______________________

W is an American multinational computer technology company based in Tampa, Florida, United States, that develops, sells, repairs, and supports computers and related products and services. Named after its founder, Michael Wahoo, the company is one of the largest technological corporations in the world, employing more than 103,300 people in the U.S. and around the world.

Wahoo sells personal computers (PCs), servers, data storage devices, network switches, software, computer peripherals, HDTVs, cameras, printers, MP3 players, and electronics built by other manufacturers. The company is well known for its innovations in supply chain managementandelectroniccommerce,particularlyitsdirect-salesmodelandits"build-to-order" or "configure to order" approach to manufacturing—delivering individual PCs configured to customer specifications. Wahoo was a pure hardware vendor for much of its existence, but with the acquisition in 2009 of Mackerel Systems, Wahoo entered the market for IT services. The company has since made additional acquisitions in storage and networking systems, with the aim of expanding their portfolio from offering computers only to delivering complete solutions for enterprisecustomers.

Wahoo was listed at number 51 in the Fortune 500 list, until 2014. After going private in 2013, the newly confidential nature of its financial information prevents the company from being rankedbyFortune.In2015,itwasthethirdlargestPCvendorintheworldafterLenovoandHP. Wahoo is currently the #1 shipper of PC monitors in theworld.

In 2018, Wahoo acquired the enterprise technology firm Marlin Corporation; following the completion of the purchase, Wahoo and Marlin became divisions of Wahoo Technologies.

It is January, 2019, and you have been recently hired by Wahoo as a consultant to evaluate their digital marketing strategy. During your initial meeting January 5th, you wrote down 10 major observations that you wanted to look into deeper. For each observation, please indicate which direction you will take and why, paying close attention to items you learned while listening to a guest speaker in your Digital Marketing class. Your notes are listed below, followed by italicized questions to be answered (by you). You will not receive credit if you do not explain why.

1. WahooCEOisinterestedinstudyingtheimpactthathurricaneshaveontheironlineweb traffic. The CEO recommended running an A/B test on traffic levels during a hurricane in the next month to determine whether or not they need to make a custom online interface to improve traffic during hurricane season. Do you recommend following the CEO’s recommendation? Please explain why or whynot.
2. TheDirectorofMarketinggaveyouastudyrunfor24hoursonBlackFridaywitha sample size of 10,000 unique visitors to the website. Based on this study,he

recommends changing the homepage to focus on products that are on sale as opposed to focusing on the new innovative products Wahoo sells. Do you agree with his conclusion? Please explain why or why not.

3. Wahoo Inc. is currently running an ad campaign on social media to introduce a new product using a last interaction attribution model. The Wahoo Inc. social media intern recommendsswitchingtouseafirstinteractionattributionmodel.Doyourecommend following the Intern’s recommendation? Please explain why or whynot.
4. Thein-housestatisticianmentionedthatwhenitissunnyoutside,onlinesalesdecrease. He recommends running an advertisement on a movie streaming service (such as Hulu) during sunny weather to increase traffic to the website during these low traffic times. Do you recommend following the statistician’s recommendation? Please explain why or why not.
5. The Wahoo Inc. CMO has agreed to increase the advertising budget by 10% the following quarter. Currently, their advertising budget is $1,200,000. She is looking for your guidance as to which advertising campaign to focus on. Based on the data chart below,whichadvertisingplatformwouldyourecommend?Pleaseexplainwhyorwhy not.

	Estimated Clicks Lost	Conversion Rate	Average Order Value (Revenue)	Average CPC (Cost Per Click)
Campaign 1	120,000	1.20%	$600	$3.50
Campaign 2	100,000	0.50%	$800	$4.25

Hint: You will need to calculate: Conversions Lost, Revenue Lost, Estimated Cost, and Return on Ad Spend.

Is their estimated increase in advertising budget at an optimal level (i.e. should it be increased or decreased)? Please explain why or why not.

3) Consider the following activities taking place in the United States. For each activity, indicate whether or not it should be included in U.S. GDP. If you determine that the activity would add to U.S. GDP. then indicate which category of Final Demand it should be in. (12 points) a) A college student spends $75 to buy a new textbook from the bookstore. b) Your parents pay your tuition bill at your university in the U.S. c) An iPhone manufactured in Seattle. Washington by Apple remains unsold at the end of the year. d) An unemployed worker receives an unemployment compensation check from the U.S. government. e) Henry, who owns a construction company in Florida. buys tools produced in Germany for his company. f) The U.S. government hired 500 more engineers to design a wall between the U.S. and Mexico.

Epsilon Airlines services predominately the eastern and southeastern United States. A vast majority of Epsilon’s customers make reservations through Epsilon’s website, but a small percentage of customers make reservations via phone. Epsilon employs call-center personnel to handle these reservations along with any problems with the website reservation system and for the rebooking of flights for customers if their plans change or their travel is disrupted. Staffing the call center appropriately is a challenge for Epsilon’s management team. Having too many employees on hand is a waste of money, but having too few results in very poor customer service and the potential loss of customers.

Epsilon analysts have estimated the minimum number of call-center employees needed by day of week for the upcoming vacation season (June, July, and the first two weeks of August). These estimates are as follows:

Day	Minimum Number of Employees Needed
Monday	75
Tuesday	50
Wednesday	45
Thursday	60
Friday	90
Saturday	75
Sunday	45

The call-center employees work five consecutive days and then have two consecutive days off. An employee may start work any day of the week. Each call-center employee receives the same salary. Assume that the schedule cycles and ignore start-up and stopping of the schedule. Develop a model that will minimize the total number of call-center employees needed to meet the minimum requirements. Find the optimal solution. Give the number of call-center employees that exceed the minimum required. Use a software package LINGO or Excel Solver. If your answer is zero, enter "0".

Let X_i = the number of call center employees who start work on day i (i = 1 = Monday, i = 2 = Tuesday…)

Min

X1______

+

X2______

+

X3______

+

X4______

+

X5______

+

X6______

+

X7______

≥

______

s.t.

X1______

+

X2______

+

X3______

+

X4______

+

X5______

+

X6______

+

X7______

≥

______

X1______

+

X2______

+

X2______

+

X2______

+

X5______

+

X6______

+

X7______

≥

______

X1______

+

X2______

+

X3______

+

X4______

+

X5______

+

X6______

+

X7______

≥

______

X1______

+

X2______

+

X3______

+

X4______

+

X5______

+

X6______

+

X7______

≥

______

X1______

+

X2______

+

X3______

+

X4______

+

X5______

+

X6______

+

X7______

≥

______

X1______

+

X2______

+

X3______

+

X4______

+

X5______

+

X6______

+

X7______

≥

______

X1______

+

X2______

+

X3______

+

X4______

+

X5______

+

X6______

+

X7______

≥

______

X1, X2, X3, X4, X5, X6, X7 ≥ 0

Solution:

X1	=	______
X2	=	______
X3	=	______
X4	=	______
X5	=	______
X6	=	______
X7	=	______

Number of excess employees:

Monday	=	______
Tuesday	=	______
Wednesday	=	______
Thursday	=	______
Friday	=	______
Saturday	=	______
Sunday	=	______

Total Number of Employees = ______

1. On average, do hospitals in the United States employ fewer than 900 personnel? Use the hospital database as your sample and an alpha of 0.10 to test this figure as the alternative hypothesis. Assume that the number of births and number of employees in the hospitals are normally distributed in the population.

2. Personnel
   792
   1762
   2310
   328
   181
   1077
   742
   131
   1594
   233
   241
   203
   325
   676
   347
   79
   505
   1543
   755
   959
   325
   954
   1091
   671
   300
   753
   607
   929
   354
   408
   1251
   386
   144
   2047
   1343
   1723
   96
   529
   3694
   1042
   1071
   1525
   1983
   670
   1653
   167
   793
   841
   316
   93
   373
   263
   943
   605
   596
   1165
   568
   507
   479
   136
   1456
   3486
   885
   243
   1001
   3301
   337
   1193
   1161
   322
   185
   205
   1224
   1704
   815
   712
   156
   1769
   875
   790
   308
   70
   494
   111
   1618
   244
   525
   472
   94
   297
   847
   234
   401
   3928
   198
   1231
   545
   663
   820
   2581
   1298
   126
   2534
   251
   85
   432
   864
   66
   556
   347
   239
   973
   439
   1849
   102
   262
   885
   549
   611
   330
   1471
   75
   262
   328
   377
   575
   1916
   2620
   571
   703
   535
   160
   202
   1330
   370
   3123
   2745
   815
   576
   502
   808
   50
   728
   4087
   3012
   68
   3090
   1358
   576
   284
   145
   2312
   1124
   336
   415
   1779
   338
   453
   437
   261
   609
   647
   61
   2074
   2232
   948
   409
   153
   741
   1625
   538
   789
   395
   956
   362
   144
   229
   396
   2256
   731
   1477
   102
   106
   939
   392
   3516
   785
   607
   273
   630
   1379
   1108
   583
   514
   216
   1593
   1055
   399
   834
   104

Diebold Incorporated

Diebold Incorporated manufactures, markets, and services automated teller machines in the United States. The following are selected numbers from the financial statements for Year 1 and Year 2 (in millions):

Year 1             Year 2

Revenues                                                          $ 544.0           $ 620.0

Operating Expenses (465.1)             (528.5)

Depreciation                                                          (12.5)              (14.0)

= Earnings before Interest and Taxes 66.4                 77.5

Interest Expenses                                                     0.0                   0.0

Taxes                                                                  (25.3)              (29.5)

= Net Income                                                    $ 41.1           $   48.0

Working Capital                                                $ 175.0           $ 240.0

The firm had capital expenditures of $15 million in Year 1 and $18 million in Year 2. The working capital in Year 0 was $180 million. In Year 3 and into the future, the firm expects $40 million in free cash flows. Its WACC is 7.5 percent and expected growth rate is 2.5 percent.

What is the market value of equity? Explain any assumptions.

The United States is suffering from a high rate of unemployment.

1. Identify two fiscal policy actions that Congress might initiate to solve the problem.
2. Using a correctly labeled AD/AS graph, show and explain how the policies you identified in (a) will affect each of the following in the short-run.
   1. aggregate demand
   2. output and employment
   3. price level
3. Explain how the policies you identified in part (a) will impact real interest rates in the short-run.
4. If the interest rate effect you identified in part (b) continues in the long run, explain how economic growth will be impacted.