Jen and Larry’s Frozen Yogurt Company

     In 2019, Jennifer (Jen) Liu and Larry Mestas founded Jean and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated to be $1.2 million in 2020.

     Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salary and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2020. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2020.

     An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) occurred at the beginning of 2019. Additional equipment needed to make the amount of yogurt forecasted to be sold in 2020 was purchased at the beginning of 2020. As a result, depreciation expenses were expected to be $50,000 in 2020. Interest expenses were estimated at $15,000 in 2020. The average tax rate was expected to be 25% of taxable income.

1. Refer to the Mini Case above involving Jen and Larry’s Frozen Yogurt Company.
   1. Calculate the dollar amount of NOPAT if Jen and Larry’s venture achieves the forecasted $1.2 million in sales in 2020. What would NOPAT be as a percent of sales?
   2. Calculate the NOPAT breakeven point for 2020 in terms of NOPAT breakeven revenues for Jen and Larry’s venture. How many cups of frozen yogurt would have to be sold to reach NOPAT breakeven?

Jen and Larry’s Frozen Yogurt Company

     In 2019, Jennifer (Jen) Liu and Larry Mestas founded Jean and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated to be $1.2 million in 2020.

     Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salary and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2020. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2020.

     An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) occurred at the beginning of 2019. Additional equipment needed to make the amount of yogurt forecasted to be sold in 2020 was purchased at the beginning of 2020. As a result, depreciation expenses were expected to be $50,000 in 2020. Interest expenses were estimated at $15,000 in 2020. The average tax rate was expected to be 25% of taxable income.

1. Jen and Larry believe that under a worst-case scenario, yogurt revenues would be at the 2019 level of $600,00 even after plans and expenditures were put in place to increase revenues in 2020. What would happen to the venture’s EBDAT?
2. Jen and Larry also believe that, under optimistic conditions, yogurt revenues could reach $1.5 million in 2020. Show what would happen to the venture’s EBDAT if this were to happen.

Below table2 shows monthly closing share prices (adjusted to include dividends) of 5 companies, and the adjusted closing prices for the ASX200 index. Table 1 is the dividends per share of the 5 companies in the past 5 years.

Calculate the average annual growth in dividends over the last five years. Use this information, along with Gordon’s Growth Model to estimate the implied expected return for each REIT at the current market price（use past 12 months as an example）. Show your analysis process.

From inception of operations to December 31, 2020, Metlock Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Metlock’s usual credit terms are net 30 days.

The balance in Allowance for Doubtful Accounts was $114,400 (Cr.) at January 1, 2020. During 2020, credit sales totaled $7,920,000, the provision for doubtful accounts was determined to be $158,400, $79,200 of bad debts were written off, and recoveries of accounts previously written off amounted to $13,200. Metlock installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows.

Based on the review of collectibility of the account balances in the “prior to 1/1/20” aging category, additional receivables totaling $52,800 were written off as of December 31, 2020. The 80% uncollectible estimate applies to the remaining $79,200 in the category. Effective with the year ended December 31, 2020, Metlock adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2020. Show supporting computations in good form. (Hint: In computing the 12/31/20 allowance, subtract the $52,800 write-off.)

  Use this Medtronic 6 path analysis to inform your development of a strategy canvas, where you will explore a reconstruction of market boundaries—looking to identify potential blue ocean spaces. In other words, explore and develop a strategy to enter new markets based on blue ocean? See 6 path analysis below, provide at least 1 reference in APA format

Six Paths Analysis

1.Industry and current state of competition

It is a Fast growth industry but still with less competition

Medtronic has a strong brand name and ability to leverage technology to products and processes

It has established a strong supply chain of channel partners and retailers

It has some economies of scales due to large scale operations

Current and new customer targets- Hospitals, health clinics, healthcare providers, and government agencies

current Product segment- healthcare Therapies and medical equipment’s

still need to look across complementary product and service offerings

It has worked so far on functional-emotional orientation of an industry, but must find new arenas to beat the current competition

2.Strategic Group

New products and new markets

Mergers and acquisitions to gain strategic advantage.

Focus on technology and improving research capabilities.

It has to Build more capacities and invest money on research and development to put a barrier to new players in industry and increase its profit margins.

New product designs using different materials need to be implemented

It still needs to follow new Purchasers who pay for the product or service, target those actual users who use the products, identify and work with those influencers who have a role to play in decisions.

3. Buyer Group

In most industries, competitors converge around a common definition of target buyer. However, there are chain of buyers who are directly or indirectly involved in buying decisions, such as:

Purchasers who pay for the product or service

Actual users who use the products

Influencers who have a role to play in decisions

Intermediate buyers who are traders

Regulators who influence the buying decisions

Thus, blue ocean strategy is formulated by finding out who are the chain of buyers in your industry and which buyer group does your industry typically focus on. Medtronic created Blue Ocean by focusing on stroke patients by launching The Solitaire™ 2 Revascularization Device instead of only focusing on diabetic patients.

4. Scope of Product or Service Offering

An organization must think about what happens before, during, and after your product/service is used by the consumers. In most industries, competitors converge within the boundary of their industry’s product and service offerings. By understanding the context in which your product or service is used and what happens before, during, and after, you can identify pain points of the consumers, and eliminate these pain points through a complementary product or service offering.

Medtronic’s complementary mission and leadership in treatments for structural heart disease represents the best possible opportunity for bringing ATS Medical’s innovative cardiac surgery technologies to more surgeons and patients.

5. Functional emotional orientation

This path delves into the functional and emotional appeal that the brand and its products have on its customers.

Its cutting edge innovative technology helps in enhancing its functional aspect of the different products.

The company has shown continual growth. This is the best example of its developing function aspect of business.

The Medtronic brand is a recognized global brand.

Many highly qualified doctors have its products, used in their diagnosis.

The brand has a deep emotional connect in the minds of the consumers. The consumers can trust the brand and consider it very dependable.

6. Time

Medtronic has proved time and again, that it has the capability to look across time and predict market trends

Its continual growth across the years portrays the effectiveness of this capability

The path-cutting technology and innovation has always kept this company, a step ahead in the market

The following commentary by Robert B. Reich was published on PROJECT SYNDICATE on April 23, 2020. Read the commentary and answer the questions that follow in your own words. Make sure that you answer each question in one paragraph, not exceeding 100 words.

Resurrect Antitrust

America’s Gilded Age in the late nineteenth century began with a raft of innovations – railroads, steel production, oil extraction – but culminated in mammoth trusts owned by “robber barons” who used their wealth and power to drive out competitors, and then to corrupt American politics.

We are now in a second Gilded Age – ushered in by semiconductors, software, and the Internet – and a handful of technology giants are the new robber barons. Facebook and Google now dominate the online advertising market, while the advertising revenue going to newspapers, network television, and other newsgathering agencies continues to decline.

Google also hosts two-thirds of all Internet searches in the United States, and is so dominant that “to google” has long since become a commonly used verb. In 2006, Google acquired the world’s largest video-hosting site, YouTube. And Facebook, for its part, has acquired more than 70 companies over roughly 15 years, including potential competitors like Instagram and WhatsApp.

Amazon, meanwhile, has become the first stop for one-third of all US consumers seeking to buy anything, including more than half of new books. Amazon’s scale translates into bargains for consumers, but it undermines supplier industries, including author royalties and publisher earnings.

This consolidation at the leading edge of the US economy has created three big problems. The first concerns economic power. Here, the issue is not the classic one of consumer prices being higher than they’d be under competitive conditions; it is that Big Tech is inhibiting innovation. The incumbents’ size, must-use platforms (owing to network effects), wall-to-wall patents and copyrights, and fleets of lawyers to litigate potential rivals into submission have allowed them to create formidable barriers to new entrants.

To be sure, large platforms like Amazon, Google, and Facebook have enabled creators to showcase and introduce new apps, songs, books, videos, and other content. But because of these platforms’ overwhelming bargaining power, they can take a large share of the profits. Partly as a result, the rate at which new job-creating businesses are formed in the US has fallen by half since 2004.

The second problem concerns political influence: massive concentrations of economic power tend to generate political clout that is easily abused. Because of its increasing size, the technology sector provides significant campaign contributions and maintains platoons of lobbyists and lawyers in Washington, DC. Google’s parent company, Alphabet, for example, is the one of the biggest lobbyists in the city.

All this power gets results: tax loopholes, subsidies, regulatory exemptions, and other forms of government largesse that is unavailable to smaller firms. Hence, in 2018, Amazon paid no federal taxes, even as it held an auction to extort billions of dollars from states and cities eager to host its second headquarters. The company has also forced Seattle, its main headquarters, to scrap a plan to tax big corporations. That revenue would have been used to pay for homeless shelters for a growing population that can’t afford sky-high rents caused, in part, by Amazon.

Big Tech’s political power also buys impunity. Facebook executives withheld evidence of malign Russian activity on their platform far longer than previously disclosed, but suffered no consequences. Perhaps more troubling,

they employed a political opposition-research firm to discredit their critics. How long will it be before Facebook uses its own data and platform against its opponents and competitors?

Google, too, has used its power to fend off criticism. It has quietly funded hundreds of university professors to write research papers justifying its market dominance, and it has threatened to cut funding to nonprofit think tanks that have criticized its economic and political power.

The third problem concerns social power: the control over the flows of communications on which people rely to understand the world. The most obvious example is the news itself. By refusing to take responsibility for the accuracy of what appears on their platforms, the Big Tech firms are actively enabling demagogues, hate-mongers, and con artists to exert unprecedented influence over society – perverting political discourse, encouraging bigotry, and even endangering children.

The tech companies’ defense is that they are not publishers, but merely the proprietors of platforms and algorithms. But this claim is belied by their platforms’ powerful network effects. The more people participate, the more necessary the platform becomes for everyone else. If people want to know what’s happening in the world, they increasingly have little choice but to engage with YouTube, Facebook, or Twitter.

Another aspect of Big Tech’s social power is its increasing capacity to pool and analyze data about all aspects of our lives, choices, and movements. This not only undermines our privacy; it challenges our very autonomy. Targeted advertising doesn’t merely respond to consumer needs and wants. It shapes our understanding of ourselves, our communities, and of the world.

These three forms of power – economic, political, and social – are rooted in Big Tech’s increasing dominance over markets, information, and communications. And that dominance is a function of these companies’ size and scope.

America responded to abuses of corporate power in the Gilded Age with antitrust laws that allowed the government to break up concentrated economic power. It is time to use antitrust again. Where breaking up Big Tech companies is impractical, those firms should at least be required to make their proprietary technology and data publicly available, and to share their platforms with smaller competitors.

Such measures would impose few costs on the economy, given that these giants rely on scale rather than innovation. Moreover, the benefits of reducing Big Tech’s concentrated power would be significant. More competition would reduce the major platforms’ market leverage and political clout. It would also give people more choice about how to receive reliable information, and greater control over which aspects of their personal lives they share.

In the second Gilded Age, as in the first, giant firms at the center of the US economy are distorting its market and its politics. Just as the problem is the same, so is the solution.

QUESTIONS:

1. In what ways have Google and Facebook become dominant in the technology sector?
2. How have the Big Tech created barriers to entry and consolidated their market power?

3. What has been the impact of the bargaining power of large platforms on new job-creating businesses?

4. Define the network effects and the positive network externalities. [Refer to Chapter 4 of our textbook here.] Explain why people all over the world would rely increasingly on YouTube, Facebook, or Twitter to reach the information?

5. What would be the new ways of dealing with the monopoly power attained by the Big Tech? [Refer to Chapter 10 of our textbook here.]

Saudi Arabia steps up oil price war with big production increase
Saudi Arabia has intensified the oil price war by ordering its state-owned producer, Saudi Aramco, to raise the maximum production rate to record highs of 13m barrels a day.
The world’s most profitable company told the Saudi stock exchange on Wednesday that it would increase how much oil it can comfortably pump per day by 1m barrels to its highest rate ever.
The state order to raise Aramco’s “maximum sustainable capacity” comes after the kingdom launched a price war on rival petro-nations by vowing to raise its production by a quarter from last month despite an oil demand slowdown because of the coronavirus outbreak.
The Saudi government plans to raise its national oil production to an average of 12.3m barrels a day from next month, up sharply from less than 10m barrels in recent months, in an attempt to corner the global market.

(source:oilprice.com)
Saudi Arabia, the world’s biggest oil exporter, is understood to be anxious to defend its market dominance against a rising tide of oil production in the US and Russia after talks to agree new limits on global production fell apart over the weekend.
Moscow refused to cooperate with an OPEC plan to curtail oil production in line with a global demand slowdown, which is expected to wipe out forecasts for demand growth in 2020.
In response, the Saudis have offered discount rates to key buyers, in direct competition with Russia, which plans to raise its own production by 300,000 barrels a day.
The collapse of Opec’s talks with major producers outside the cartel, known as Opec+, marks an end to an almost four-year alliance established in the wake of the 2016 oil price crash to shore up market prices by limiting new supply into the market.
Russia’s energy minister, Alexander Novak, has not ruled out further talks with Opec to help stabilise the oil market. But both sides of the price standoff are adamant that they are prepared to weather a prolonged price rout.
Saudi Arabia has some of the lowest production costs in the world, meaning Aramco could withstand low prices far better than other big oil companies. However, the Saudi economy relies more heavily on oil revenues than most countries and reportedly requires prices of about $50-$60 (£38-£46) a barrel to support its state coffers.
In Russia, production costs are higher but its economy is more diverse and arguably more resilient to another oil market downturn.
The oil price war was ignited this week by the steepest price crash since 1991, which drove prices down to four-year lows of about $35 a barrel on Monday and sparked fears of an extended oil market downturn in 2020.
The price shock has wiped billions from the market value of oil companies this week, forcing down the share price of big firms including Shell and BP by about 20%, and raising concern over their dividends.
Analysts at Rystad Energy have warned that oil prices in the $30 territory could spell trouble for oilfield service companies too as big producers cut their spending on new projects. This spending could fall by $100bn in 2020 and a further $150bn next year, Rystad said.
The geopolitical spat has also compounded fears of a global economic slowdown, which accelerated this year after the outbreak of the Covid-19 virus
(Adapted from the Guardian Wed 11 Mar 2020)

Questions
.
1) What has happened to the price of oil since the beginning of January 2020? According to the article which country, Russia or Saudi Arabia, is in a better position to sustain prices at this low level for the longest period of time? Justify your answer.


2) According to the article why has Saudi Arabia decided to increase oil production to record levels at this time?

3) Using demand and supply diagrams examine the most likely causes for the fall in the price of oil since the beginning of January 2020.   
4) What is a cartel and how does it influence the price and output of oil. In your answer you should refer to the type of market structure normally associated with a cartel and the features which help or hinder collusion.

5) Why are some of the members of OPEC and other oil producers increasing production even though the price elasticity of oil is relatively inelastic?

Suppose you have a pair of tetrahedra. One is red on one face, yellow on two faces, and green on one face. The other is white and has faces marked 1, 2, 3 ,4

a. Complete the table

b. If both tetrahedra are tossed, what is the probability of a red (facing down) and a 3 (facing down)? Of a yellow (facing down) and a number >1 on the other (facing down?) Of a green (facing down) and a number >4 (facing down) on the other? Of a yellow (facing down) on the colored one and a sum of >2 of faces showing on the other?

Locate the Consumer Price Index – August 2020 publication

  Helpful Tip: You can find the answers to the questions below in the first two pages of the publication.

• What happened to the CPI inflation rate in March, April, and May 2020? Why do you think this happened?

• What happened to the core rate of inflation in March, April, and May 2020? Why do you think this happened?

Brooke, a single taxpayer, works for Company A for all of 2020, earning a salary of $50,000.

b. Assume Brooke works for Company A for half of 2020, earning $50,000 in salary, and she works for Company B for the second half of 2020, earning $90,000 in salary. What is Brooke’s FICA tax obligation for the year? (Round your intermediate calculations to the nearest whole dollar amount.)

FICA Tax Obligation ______________________