Pendergast, Inc., has no debt outstanding and a total market value of $180,000. Earnings before interest and taxes, EBIT, are projected to be $23,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 30 percent lower. Pendergast is considering a $75,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Ignore taxes for this problem.

Answer all of the following:

A-1 Calculate the earning per share EPS under each of the three economic scenarios before any debt is issued. (Round your answers to 2 decimal places. (e.g., 32.16))

A-2 Calculate the percentage changes in EPS when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign.)

B-1 Assume that the company goes through with recapitalization. Calculate earnings per share (EPS ) under each of the three economic scenarios assuming the company goes through with the recapitalization.

B-2 Given the recapitalization calculate the percentage changes in EPS when the economy expands of enters a recession.

Pendergast, Inc., has no debt outstanding and a total market value of $180,000. Earnings before interest and taxes, EBIT, are projected to be $23,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 30 percent lower. Pendergast is considering a $75,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Pendergast has a tax rate of 35 percent.

A-1 Calculate the earning per share EPS under each of the three economic scenarios before any debt is issued. (Round your answers to 2 decimal places. (e.g., 32.16))

A-2 Calculate the percentage changes in EPS when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign.)

B-1 Assume that the company goes through with recapitalization. Calculate earnings per share (EPS ) under each of the three economic scenarios assuming the company goes through with the recapitalization.

B-2 Given the recapitalization calculate the percentage changes in EPS when the economy expands of enters a recession.

Review the Strategic Management Project Background and your strategic management research journal entries from Weeks 1–4.

Create a 10-12 slide presentation, including title, agenda, and reference slides, for Caterpillar Inc.'s leadership in which you summarize your key findings, propose recommendations, and provide appropriate rationale for them.

Respond to the following prompts:
•   Summarize your evaluation of the alignment between what Caterpillar Inc. is currently doing and their mission, vision, and values statements. Would you propose any changes to Caterpillar Inc.'s mission, vision and/or values statements? Why or why not? (Refer to Wk 1, Bullet #4.)
•   Summarize your assessment of whether Caterpillar Inc. is leveraging the appropriate value and cost drivers for their business strategy. Would you propose any changes? Why or why not? (Refer to Wk 2, Bullet #3.)
•   Summarize your analysis of the strengths and weaknesses of Caterpillar Inc’s competitive advantages. Based on your analysis would you propose any changes? Why or why not? (Refer to Wk 2, Bullet #4.)
•   Summarize your assessment of whether Caterpillar Inc. is using the appropriate measures to verify its strategic effectiveness. Based on your analysis would you propose any changes? Why or why not? (Refer to Wk 3, Bullet #1.)
•   Summarize your evaluation of Caterpillar Inc.’s competitive position and how they have responded to shifts in the external and internal environments. Would you propose any changes in how Caterpillar Inc. responds to shifts in the external and internal environments? Why or why not? (Refer to Wk 3, Bullet #5.)
•   Summarize your evaluation of how mergers and acquisitions in the past five years have contributed to Caterpillar Inc.’s performance. Would you propose that Caterpillar Inc. pursue mergers and acquisitions in the future? Why or why not? (Refer to Wk 4, Bullet #2.)
•   Summarize your assessment of Caterpillar Inc.’s global strategy. Based on your assessment would you propose any changes? Why or why not? (Refer to Wk 4, Bullet #3.)

Write a function to solve the two-dimensional in Matlab, unsteady heat conduction equation with no internal heat generation on a square domain. The length of each side of the square is 1 m. The function will have the following 4 inputs:

npts                     number of grid points in each coordinate direction

nt                         number of time steps to take

dt                         size of time step (s)

alpha                   thermal diffusivity (m²/s)

Use the following initial and boundary conditions:

Initialize the body to T = 0 ^oC. At time t = 0, boundary conditions are imposed such that the temperatures on the sides of the square vary linearly. Here are the corner temperatures:

bottom left corner:         T =   50 ^oC

bottom right corner:      T = 500 ^oC

top right corner:             T = 350 ^oC

top left corner:               T = 150 ^oC

Write the function definition statement. If you type doc function at the MATLAB command prompt it will give you details on the proper syntax. The syntax is general, showing how to use both inputs and outputs. We will have no outputs, only the four inputs noted above.

Make the name of your function the same as the name of your file. For example, if you call your function heat, then your filename should be heat.m.

Create a variable name for each of the four corner boundary conditions and the initial condition, and set their values.

Noting that the temperature on each edge varies linearly, calculate the temperature at every grid point on the outer boundaries. You’ll need the corner temperatures to do this calculation.

Create an array to contain the “old” temperature field at time level p, and call it told. A convenient way to do this is to use the ones function (look at doc ones), which creates an array of all ones of specified dimensions. An easy way to set the field to the initial condition is to multiply this array by the initial temperature.

If there are any calculated variables that you will use multiple times, calculate them. For example, it’s handy to have a variable npm = npts – 1, where npts is the input number of points in each direction.

Create an array to contain the “current” solution at time level p+1, and call it tnew. An easy way to do initialize it in MATLAB is to simply use

tnew = told;

Create a time loop going from 1 to nt, where nt is the input number of time steps.

Inside the time loop, create two other nested loops, one for the “m” indices (x direction) and one for the “n” indices (y direction). Since we don’t have to re-calculate any values on boundaries, the loops will go from 2 to npm.

For each pair of indices within the loops, calculate the solution at time level p+1 (tnew) as a function of temperatures at time level p (told) using the finite-difference form of the 2-D heat equation.

We are going to do a simple animation of the unsteady results as they evolve. Use the contourf function to create the evolving contour plot. (doc contourf) One of the arguments is the number of contours, and 20 seems to work well for this problem. We want to re-draw the contour plot once per time step, so contourf should be called after the end of the nested spatial loops, but before the end of the time loop. It’s not necessary to use a plot handle as we did in the example in class. Simply call contour each time through the loop.

MATLAB tries to be efficient, so when it sees the contourf function, it will buffer the results rather than plotting them right away. We don’t want it to buffer since we want to create a real-time animation. To prevent buffering, include a drawnow statement on a separate line immediately after the call to contourf. (This is similar to the example we did in class.)

Now that the current time step is complete, we have to copy the new solution to the old one so we can go on to the next iteration, told = tnew. Make this the last line before the end of the time loop.

Add the following to the end of the time loop. The first line adds a “colorbar,” which is a scale showing the correspondence between temperatures and colors. The second line adds a label to the colorbar. Finally, the third line gets rid of the plot axes, since we don’t need them here.

hc = colorbar;

hc.Label.String = ‘Temperature, deg. C’;

axis off

When you’re got your program ready to run, use the following input values:

npts = 40

nt = 1000

dt = 0.1

alpha = 0.001

To run the program, simply type

heat(40, 1000, 0.1, 0.001)

Match each of the following scenarios with the type of resistance to change that it most clearly exemplifies.

Group of answer choices

1. The structural changes at Ray’s company involve no downsizing and will dramatically reduce inefficiency and red tape. Still, Ray doesn’t like the changes because he doesn’t want to put forth effort into learning a new way of doing things.

      [ Choose ]            fear of the unknown            threatened power            narrow focus of change            habit            economic factors            lack of awareness            social factors      

2. Vega was on vacation when a new process to document computer bugs was implemented. Nobody told Vega, so when she returned from vacation, she continued to use the previous process.

      [ Choose ]            fear of the unknown            threatened power            narrow focus of change            habit            economic factors            lack of awareness            social factors      

3. Bianca likes that the company acknowledges employee birthdays once a month and she has been joining in the celebration in the break room for a few minutes when they occur, but none of the coworkers in her department ever attend, and they have been teasing her about her participation. She has decided to stop attending.

      [ Choose ]            fear of the unknown            threatened power            narrow focus of change            habit            economic factors            lack of awareness            social factors      

4. Garrett is opposed to the new structural changes because he’s afraid that they will cost him his job.

      [ Choose ]            fear of the unknown            threatened power            narrow focus of change            habit            economic factors            lack of awareness            social factors      

5. Cammy was all for the structural changes at her company until she realized that fewer people were going to report to her after the changes.

      [ Choose ]            fear of the unknown            threatened power            narrow focus of change            habit            economic factors            lack of awareness            social factors      

6. Kenny, director of the hospital pharmacy, decided to upgrade the decades-old software, but after the upgrade, he discovered the pharmacy’s electronic records are now incompatible with the systems used by the inpatient and outpatient clinics, since they are still using old software.

      [ Choose ]            fear of the unknown            threatened power            narrow focus of change            habit            economic factors            lack of awareness            social factors      

7. Ed’s job tasks were recently redesigned. While he knows the changes are likely to improve his overall productivity, he is uncomfortable with the changes because so much of his job is now unfamiliar to him.

      [ Choose ]            fear of the unknown            threatened power            narrow focus of change            habit            economic factors            lack of awareness            social factors      

Entrepreneurs have been a driving force in the beverage industry for more than a century. In 1886, John Pem- berton began marketing Coca-Cola as an over-the- counter medicine, and in 1929 Charles Grigg developed Bib-Label Lithiated Lemon-Lime Soda, today known as 7UP. The beverage industry has always provided oppor- tunities for entrepreneurs, but in the current market, the cost of purchasing new ingredients and technologies and the intense competition make the odds of a successful new product introduction less likely than in the past.1
New beverages are developed every year. In some years, more than 3,000 new beverage products are brought to the market, but many do not succeed. Entre- preneurs who attempt to succeed in this industry must be aware of the changing consumer tastes and industry trends.

Caffeinated Products: Coffee, Soft Drinks, and Water

Specialty coffee outlets in the United States experienced explosive growth during the 1990s, growing from only 200 in 1989 to approximately 10,000 by 2000.3
The most well-known name in the gourmet coffee in- dustry is Starbucks, but few people realize the company began in 1971. The company was started by three en- trepreneurs in Seattle’s Pike Place Market. The focus was on coffee and equipment, including filters, grinders, and pots—no scones, no cappuccinos. By 1987, there were only six Starbucks outlets, but another entrepreneur, Howard Schultz, saw the potential of Starbucks after traveling to Italy and seeing the many coffee bars there. Schultz raised $3.8 million and bought the company. The company went public in 1992 at $17 per share and within five months the stock price had doubled.4 By 2001, Starbucks had expanded to 3,500 stores in North America and 800 stores overseas.5 By 2004, it had 7,569 stores worldwide.6 Starbucks is also equipping its stores for high-speed wireless Internet access, so customers can surf the Net on their laptops or Palm Pilot. The longer people linger at the stores, the more likely they are to order another latte.7
Many entrepreneurs are not willing to let Starbucks own the coffee market, though. Caribou Coffee Com- pany was started by entrepreneurs after they had climbed mountains in Alaska in 1990 and saw a herd of  caribou in the valley below. By 2004, the company was the nation’s second largest specialty coffee company, em- ploying more than 3,000 people. The Caribou Coffee outlets look like Alaskan lodges with fireplaces and wooden cabinetry.8
A recent trend toward caffeinated soft drinks began with Jolt. Jolt was introduced in 1985 by C. J. Rapp, president of Global Beverages. Jolt became a moderate success and a fixture in the marketplace at a time when most other companies were taking caffeine out of their products. Although similar products entered the mar- ket after Jolt, there were few other successes.9 How- ever, by the late 1990s, caffeinated soft drinks were common and other companies were introducing simi- lar products.10
By the mid-1990s, an entrepreneur had developed another successful idea. A college student, David March- eschi, who used to pull all-nighters cramming for tests, developed the idea for caffeinated water. Although other students drank coffee or soda to stay awake, Marcheschi did not like the taste of either. He wondered why some- one couldn’t caffeinate plain water. A few years later, he mentioned his idea to a friend whose father owned a beverage company and within a few weeks, the formula  beverage company and within a few weeks, the formula for Water Joe was developed. In 1995, Marcheschi formed a partnership with Nicolet Forest Bottling and the product was launched.11 A small article appeared in a local paper, and then the Milwaukee Sentinel ran a front-page story that was picked up by the Associated Press. Articles about Water Joe spread rapidly across the United States.12 By the end of 1996, Water Joe was ship- ping 400,000 bottles each week and annual sales were about $12 million.13 By the year 2000, Water Joe had be- come a subsidiary of Artesian Investments, a 16-year-old company in Green Bay, Wisconsin. The national account manager for Artesian Investments states, “What we’re giving people is a healthier alternative.”14 As of 2003, Water Joe had expanded into Germany and was being introduced in the United Kingdom.15
Other creative entrepreneurs decided to sell similar products over the Internet. The founders of Thinkgeek. Com sell a “Case O’ Buzz Water.” Each bottle of water has the same amount of caffeine as two extra large cups of coffee.16
Herbal Drinks and Green Teas

Herbal drinks first become popular in 1970 when Mor- ris J. Siegel founded Celestial Seasonings, Inc., which markets herbal teas.17 Siegel has been described as a hip- pie with a penchant for herbs, and this persona has had a positive effect on the company. The culture of non- conformity led to a great deal of creativity, and by the mid-1990s, Celestial Seasonings was the leading spe- cialty tea maker in the United States.18 By 1998, Celes- tial Seasonings had jumped into the fastest growing segment in the tea industry—the green tea category. The market for green tea increased 53 percent in 1997 and showed no signs of slowing. Much of the growth in sales was attributed to research reports indicating that green tea may lower the risk of certain types of cancer and bal- ance cholesterol.19 By the end of the decade, Celestial Seasonings had teamed up with the company that intro- duced Arizona Iced Tea and launched a line of ready-to- drink teas in a smart retro bottle that looks like the melding of a glass bottle and a tin can.20
In 2000, Celestial Seasonings merged with the Hain Food Group. As of 2004, Celestial Seasonings was sell- ing 1.2 billion cups of tea per year. Morris (Mo) Siegel retired to climb the last section of the Colorado moun- tains he had not yet climbed.21
John Bello, cofounder of SoBe Beverage Co., says his company is “taking the concept of herbal remedies to the mass market.” SoBe’s products include a variety of teas containing plant extracts that improve alertness. One of the company’s “energy tonics” allows drinkers “to perform all day and all night.” Other teas include echi- nacea, selenium, or bee pollen for additional therapeutic purposes.22 A new marketing approach was imple- mented for some of its products in 2000. Six of its products—Energy, Lizard Fuel, Lizard Lightning, Elixir, Green Tea, and Lemon Tea—were marketed in paper cans. Each octagonal paper can was adorned with the radical SoBe lizard. The colorful labels come in pink, or- ange, tan and bright yellow.23 As of 2004, SoBe bever- ages were available internationally. The company was selling its product in Canada, Mexico, the Bahamas, the United Kingdom, Barbados, and Guam.24
Richard Keer, president of The Natural Group, an im- porter of all-natural nonalcoholic beverages, has re- cently begun to market a product called Ame, a drink made with fruit juices, eastern herbs, and spring water. It is available in red, white, and rose and is packaged in 250-ml and 750-ml bottles. The company also sells Nor- folk Punch, a nonalcoholic beverage based on an ancient monastic recipe of 35 different herbal extracts like fennel, rosemary, and peppermint.25

Juice Bars and Smoothies
Proponents of smoothies contend that the beverage is one of the most promising new beverage items since spe- cialty coffees. The term smoothie is a generic term for a blender-made concoction typically made from fresh fruit, fruit juices, ice, and sherbet or yogurt. Optional add-ons include calcium, protein powder, bee pollen, or the herb gingko biloba. Smoothies are often sold at juice bars and are marketed as a lowfat, high-nutrition meal in a cup.26
One company, Smoothie King, has been in existence for 24 years, since long before the great demand for the product developed. Richard Leveille, vice president of franchise development, calls Smoothie King’s products the first and best available. Its product is not yogurt- or sherbert-based, but primarily fruit-based. Smoothie King makes daily deliveries to the Dallas Cowboys camp, and during spring training it delivers 200 to 300 smoothies a day to the New York Yankees in Tampa.27 By 2004, Smoothie King had 340 units in 34 states and also had three international units.28
Another company, Jamba Juice Co., was establishing itself as a leader in the juice bar segment. Founder, Kirk Perron, established his first juice bar when he was 26 years old. Perron states that his company did not “invent smoothies or squeeze-to-order juices,” but his company was the first to “unlock the code and create a sensory ex- perience in those products.” Jamba Juice sells its prod- ucts in an atmosphere of hot pinks, purples, greens, oranges, and natural woods.29 By December 2004, the company had 430 units, with locations in airports and  oranges, and natural woods.29 By December 2004, the company had 430 units, with locations in airports and on college campuses.30

Duiscussion Questions

Using demographic segmentation, segment the market for

a. Water Joe

b. Celestial Seasonings tea

c. Smoothies

d. the green tea industry

Using benefit segmentation, segment the market for

a. Water Joe

b. Koppla

c. Smoothies

d. the green tea industry

The rapid growth of Water Joe fueled the creation    of the caffeinated water industry in 1996. How long do you expect the rapid growth of this industry to continue?

Identify potential market segments for Ame and the energy tonic, the products of SoBe Beverage Co.

What impact do entrepreneurs have on the beverage industry?

What national trend would be beneficial for Celestial Seasonings but detrimental for Water Joe?

Within an accounting cycle,explain how income statement,changes in owners equity and balance sheet are prepared ??

Explain how changes in the economy affect prices. Give two examples from the current business environment