Case 2 – Mobile Ads

According to eMarketer, mobile ads will top 100 and it accounts for about 16.5 percent of total advertising spending in 2016. The top five spenders of mobile ads are the United States, China, the United Kingdom, Japan and Germany. This number is expected to increase as the worldwide adoption of smartphones continue to grow. In 2015, there were about 2.6 billion smartphone users. This number is expected to top 6.1 billion globally by 2020.

Businesses are increasingly using mobile ads. Location data from mobile devices is the key element for a successful mobile ad campaign. Facebook and Google are two biggest players that generate the highest revenue from mobile ads. PlaceIQ, a technology form headquartered in New York city collects billions of data points from mobile devices and other sources and is able tract potential customers as they move from one retail location to another retail location – such as from one car dealership to another. PlaceIQ is also able to help businesses find out if the ads can translate to an actual visit by a customer. In addition to its huge data set for business, PlaceIQ also offers location data and analytics tools to businesses and allows them to do their own advertising.

Audi is using the Place IQ data to measure how many potential customers will visit its dealerships before and after they have seen ads. They also want to target potential customers who are visiting their competitors’ showrooms. Stacom Media Group is using PlaceIQ in order to find out how mobile location data can be helpful and eventually attract more customers to a business.

Questions:

a)     By 2020 how many smartphones will be existing globally?

b)    Who are the two leading companies that generate the biggest revenue from mobile ads?

c)     How PlaceIQ impact businesses?

d)    Why is Audi using the services offered by PlaceIQ?

e)    Your overall observation and learning from the above case study.

According to eMarketer, mobile ads will top 100 and it accounts for about 16.5 percent of total advertising spending in 2016. The top five spenders of mobile ads are the United States, China, the United Kingdom, Japan and Germany. This number is expected to increase as the worldwide adoption of smartphones continue to grow. In 2015, there were about 2.6 billion smartphone users. This number is expected to top 6.1 billion globally by 2020.

Businesses are increasingly using mobile ads. Location data from mobile devices is the key element for a successful mobile ad campaign. Facebook and Google are two biggest players that generate the highest revenue from mobile ads. PlaceIQ, a technology form headquartered in New York city collects billions of data points from mobile devices and other sources and is able tract potential customers as they move from one retail location to another retail location – such as from one car dealership to another. PlaceIQ is also able to help businesses find out if the ads can translate to an actual visit by a customer. In addition to its huge data set for business, PlaceIQ also offers location data and analytics tools to businesses and allows them to do their own advertising.

Audi is using the Place IQ data to measure how many potential customers will visit its dealerships before and after they have seen ads. They also want to target potential customers who are visiting their competitors’ showrooms. Stacom Media Group is using PlaceIQ in order to find out how mobile location data can be helpful and eventually attract more customers to a business.

Questions:

a)     By 2020 how many smartphones will be existing globally?

b)    Who are the two leading companies that generate the biggest revenue from mobile ads?

c)     How PlaceIQ impact businesses?

d)    Why is Audi using the services offered by PlaceIQ?

e)    Your overall observation and learning from the above case study.

The Managing Director of Wraymand plc has asked you to prepare the statement of comprehensive income for the group. The company has one subsidiary undertaking, Blonk Ltd. The statements of comprehensive income of the two companies for the year ended 31 March 2020 are set out below. Statements of comprehensive income for the year to 31 March 2020 Wraymand Blonk £000 £000 Sales revenue 38,462 12,544 Cost of sales (22,693) (5,268) –––––– –––––– Gross profit 15,769 7,276 Dividend from Blonk Ltd 580 –––––– 16,349 Distribution costs (6,403) (2,851) Administrative expenses (3,987) (2,466) –––––– –––––– Profit from operations 5,959 1,959 Finance costs (562) (180) –––––– –––––– Profit before tax 5,397 1,779 Taxation (1,511) (623) –––––– –––––– Profit for the year 3,886 1,156 –––––– –––––– Further information: (i) Wraymand plc acquired 75% of the ordinary share capital of Blonk Ltd on 1 April 2019. (ii) During the year, Blonk Ltd sold goods which had cost £1,100,000 to Wraymand plc for £1,600,000. All of the goods had been sold by Wraymand plc by the end of the year.

On January 1, 2018, Winn Heat Transfer leased office space under a three year operating lease agreement. The arrangement specified three annual rent payments of $102,000 each, beginning December 31, 2018, and at each December 31 through 2020. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 8%. Winn also paid a $276,000 advance payment at the beginning of the lease in addition to the first $102,000 rent payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $378,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2020. Winn’s fiscal year is the calendar year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollars.)

Bumblebee Company estimates that 318,000 direct labor hours will be worked during the coming year, 2020, in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year.

It is estimated that direct labor hours worked each month will range from 22,500 to 33,900 hours.

During October, 22,500 direct labor hours were worked and the following overhead costs were incurred.

Fixed overhead costs: Supervision $7,830, Depreciation $5,760, Insurance $2,510, Rent $1,730, and Property taxes $1,120.

Variable overhead costs: Indirect labor $11,890, Indirect materials, $5,920, Repairs $2,170, Utilities $3,775, and Lubricants $1,415.

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 3,800 direct labor hours over the relevant range for the year ending December 31, 2020. (List variable costs before fixed costs.)

Streamland SA started producing a new mini series featuring super heroes with useless powers. The management board considered various financing options. The CFO, Sam Yang, suggested to issue convertible bonds, an instrument that had not been used by the company before. The other board members were hesitant at first but eventually agreed that convertible bonds were the best option to finance this production. Therefore, Streamland SA issued €18,000,000 of 8%, 5-year convertible bonds on January 1, 2020, at 95 with interest payable on December 31. Each of the 18,000 €1,000 bonds is convertible into 10 ordinary shares (par value of €1). Using the prevailing market interest rates at the issuance date for similar non-convertible bonds, the bonds would have been sold at 90. Any bond premium or discount is amortized annually using the effective-interest method.

At maturity, the bond has been repurchased. Prepare the schedule of bond amortization for the convertible bonds for all years (2020 to 2024) and the journal entry(ies) for the last year of the bond schedule. (15p)

but how do i know the market interest rate?

Exercise 9-11 (Video)

Atlanta Company is preparing its manufacturing overhead budget for 2020. Relevant data consist of the following.

Prepare the manufacturing overhead budget for the year, showing quarterly data. (Round overhead rate to 2 decimal places, e.g. 1.25. List variable expenses before fixed expense.)

On February 5, 2019, Javier Sanchez purchased and placed in service a new 7-year class asset costing $477,200 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC).

Rather than using bonus depreciation, Javier would like to use § 179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. During 2018, his business generated a net income of $572,640 before any § 179 immediate expense election.

If required round your intermediate computations and final answers to the nearest dollar. Click here to access the depreciation table to use for this problem.

a. Determine the cost recovery deductions (including first year additional depreciation) that Javier Sanchez can claim with respect to this asset in 2019 and 2020.
Total cost recovery deduction in 2019: $
Total cost recovery deduction in 2020: $

b. Complete Javier's Form 4562 (page 1) for 2019.

Note: For 2019, the maximum § 179 is $1,020,000 and the threshold amount is $2,550,000. If an amount is zero, enter "0". Enter amounts as positive numbers.

Brees Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Brees have decided to make their own estimate of the firm’s common stock value. The firm’s CFO has gathered data for performing the valuating using the free cash flow valuation model. The firm’s weighted average cost of capital is 10%, and it has $800,000 of debt at market value and $600,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 4 year, 2020 through 2023, are given below. Beyond 2017 to infinity, the firm expects its free cash flow to grow by 3% annually.
2020 RM 100000
2021 RM 200000
2022 RM 310000
2023 RM 450000

A) estimate the value of the entire company using the free cash flow valuation model?

b) using finding in part a, find the common stock value?

c) if the firm plan to issue 100,000 shares of common stock, what is the estimated value per share?

Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public​ offering, managers at Nabor have decided to make their own estimate of the​ firm's common stock value. The​ firm's CFO has gathered data for performing the valuation using the free cash flow valuation model.

The​ firm's weighted average cost of capital is 12%​, and it has $1,970,000 of debt at market value and $390,000

of preferred stock in terms of market value. The estimated free cash flows over the next 5​ years, 2020 through 2024​,

are given in the​ table,

Beyond 2024 to​ infinity, the firm expects its free cash flow to grow by 3% annually.

2020   $220,000
2021   $280,000
2022   $320,000
2023   $390,000
2024   $430,000

a.  Estimate the value of Nabor​ Industries' entire company by using the free cash flow valuation model.

b.  Use your finding in part a, along with the data provided​ above, to find Nabor​ Industries' common stock value.

c.  If the firm plans to issue 200,000 shares of common​ stock, what is its estimated value per​ share?