Section 1: True/False, & explain why in two or three sentences:

4. You are trying to forecast the quarterly US dollar-Euro exchange rate as a function of the difference between US & EU benchmark interest rates in this quarter and the previous quarter. This is an autoregressive distributed lag model.

Introduction - AdCreate's Client Portfolio. Read the overview below and complete the activities that follow.

AdCreate is a full-service advertising agency with several high profile marketing firms as clients. Given their vast client list and the varied services they provide to different clients, they are compensated differently by different clients. Jacob Stein, who recently joined AdCreate in the finance department, was asked to review the various compensation models being used by some of AdCreate's biggest clients.

CONCEPT REVIEW: The type and amount of services an ad agency performs vary from one client to another. As a result, agencies use a variety of methods to get paid for their services. Agencies are typically compensated in three ways: commissions, some type of fee arrangement, or percentage charges.

Case Analysis

Agency Compensation Methods:

Read the report below, which provides a summary of AdCreate's compensation agreements with four of its major clients, and answer the questions that follow. NOTE: There may be more than one answer to each question. You MUST list all potential answers for full marks.

AdCreate has a negotiated commission system agreement with Worry Free Financial. Worry FreeFinancial advertises on T.V. mainly and has the following sliding scale for media commissions in its agreement with AdCreate: 15% commission for media expenditures of less than $ 300,000, 12.5%commission for media expenditures between $ 300,000 and $ 400,000 and 10% commission for media expenditures above $ 500,000.

AdCreate has a cost-plus agreement with Still Water Furnishings. Under the cost-plus terms, AdCreate uses a mark up of 13% for services provided to Still Water Furnishings.

With Anchor Motors, AdCreate has an incentive-based agreement. Under the terms of this agreement, AdCreate gets to keep the full 15% commission from media if Anchor Motor's sales for the period of advertising show an increase of 5% or greater compared to sales in the same period the previous year. For sales increase between 3% and 5%, AdCreate gets to keep 13% out of the 15% media commission. Finally, for sales increase between 1% and 3%, AdCreate gets to keep 10% out of the 15% media commission.

AdCreate has a percentage charges agreement with Globe Travel Adventures. Under these terms, AdCreate charges a mark up of 17.65% on services from outside providers like printers, photographers, etc.

Please explain your answers, and why you chose that specific answer over others.

Question 1.

AdCreate has negotiated a rate of 12.5% for a commission system payment, with Worry Free Financial for a campaign in 2010. AdCreate arranged for airing three ads, during Newshour on CNN, in the first week of the launch campaign. AdCreate's income for these three ads in the first week was $49,375. Based on this information, which of the following is true?

• I. The client (Worry Free Financial) paid AdCreate $425,625 for the three ads

• II. AdCreate paid CNN $425,625 for the three ads

• III. AdCreate paid CNN $345,625 for the three ads

Question 2.

Under the cost-plus agreement that AdCreate has with its client Still Water Furnishings, Jacob Stein noticed that AdCreate incurred costs of $625,000 for a print and direct mail campaign during 2010. Under the cost-plus terms, AdCreate used a mark up of 13% for services provided to Still Water Furnishings. Based on this information, which of the following is true?

• a. The client (Still Water Furnishings) paid AdCreate $706,250 in 2010

• b. AdCreate's income from the Still Water Furnishings account in 2010 was $81,250

• c. The client (Still Water Furnishings) paid AdCreate $700,000 in 2010

Question 3.

In reviewing the incentive-based agreement between AdCreate and Anchor Motors, Jacob Stein found that sales of Anchor rose 5.2% compared to the previous year in the second quarter. AdCreate paid the media $895,000 for Anchor Motors ads during the same period. Based on this information, which of the following is true for the second quarter billings?

• a. AdCreate billed Anchor Motors $1,152,941 for the second quarter in 2010

• b. AdCreate's income from the Anchor Motors account for the second quarter of 2010    

       was $257,941

• c. AdCreate billed Anchor Motors $1,052,941 for the second quarter in 201

Question 4.

In reviewing the agreement between AdCreate and Anchor Motors, Jacob Stein found that sales of Anchor rose 2.8% compared to the previous year in the third quarter. AdCreate paid the media $450,000 for Anchor Motors ads during the same period. Based on this information, which of the following is true for the third quarter billings?

• 1. AdCreate billed Anchor Motors $502,941 for the third quarter in 2010

  2. AdCreate's income from the Anchor Motors account for the third quarter of 2010 was $79,412

• 3. AdCreate billed Anchor Motors $529,412 for the third quarter in 2010

• Question 5.

In reviewing the percentage charges agreement between AdCreate and Globe Travel Adventures, Jacob Stein found that AdCreate paid a printing firm $220,000 for a direct mail brochure for Globe Travel Adventures in 2010. Based on this information, which of the following is true?

• 1. AdCreate's income from Globe Travel Adventures in 2010 was $28,830

• 2. The mark up of 17.65% of the cost amounts to a 15% commission

3. AdCreate billed Anchor Motors $258,830 in 2010

3. In a study of the long-run and short-run demands for money, Chow estimated the following demand equation (standard errors in parentheses) for the United States from 1947:1 through 1965:4:

Mt=0.14+1.05Yt*-0.01Yt-0.75Rt

(0.15)        (0.10)       (0.05)

R²= 0.996

DW = 0.88^**

Breusch-Godfrey LM Test= 8.38^**

N = 76 (quarterly)

where:

Mt = the log of the money stock in quarter t

Yt^* = the log of permanent income (a moving average of previous quarters’ current income) in quarter t

Yt = the log of current income in quarter t

Rt = the log of the rate of interest in quarter t

a. Test for the significance of the coefficients and for the overall significance of the model.

b. What econometric problems seem likely to be in this equation?

c. In particular, are there are any problems related to the coefficient of Y? If so, are these problems more likely to have been caused by multicollinearity, serial correlation, or heteroskedasticity?

d. What suggestions would you have for another estimation of this equation? Why?

3. In a study of the long-run and short-run demands for money, Chow estimated the following demand equation (standard errors in parentheses) for the United States from 1947:1 through 1965:4:

Mt=0.14+1.05Yt*-0.01Yt-0.75Rt

                                                                              (0.15)        (0.10)       (0.05)

R²= 0.996

DW = 0.88^**

Breusch-Godfrey LM Test= 8.38^**

N = 76 (quarterly)

where:

Mt = the log of the money stock in quarter t

Yt^* = the log of permanent income (a moving average of previous quarters’ current income) in quarter t

Yt = the log of current income in quarter t

Rt = the log of the rate of interest in quarter t

a. Test for the significance of the coefficients and for the overall significance of the model.

b. What econometric problems seem likely to be in this equation?

c. In particular, are there are any problems related to the coefficient of Y? If so, are these problems more likely to have been caused by multicollinearity, serial correlation, or heteroskedasticity?

d. What suggestions would you have for another estimation of this equation? Why?

roblem 7-25A Schedule of Expected Cash Collections; Cash Budget [LO7-2, LO7-8] Herbal Care Corp., a distributor of herb-based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $40,000, 90-day loan from its bank to help meet cash requirements during the quarter. Since Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled: a. On July 1, the beginning of the third quarter, the company will have a cash balance of $52,500. b. Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account): May (actual) $ 390,000 June (actual) $ 430,000 July (budgeted) $ 550,000 August (budgeted) $ 760,000 September (budgeted) $ 390,000 Past experience shows that 25% of a month’s sales are collected in the month of sale, 70% in the month following sale, and 3% in the second month following sale. The remainder is uncollectible. c. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: July August September Merchandise purchases $ 330,000 $ 456,000 $ 234,000 Salaries and wages $ 43,500 $ 62,000 $ 63,000 Advertising $ 220,000 $ 143,000 $ 103,000 Rent payments $ 9,400 $ 9,400 $ 9,400 Depreciation $ 10,500 $ 10,500 $ 10,500 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $258,000. d. Equipment costing $10,000 will be purchased for cash during July. e. In preparing the cash budget, assume that the $40,000 loan will be made in July and repaid in September. Interest on the loan will total $1,200. Required: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. 2. Prepare a cash budget, by month and in total, for the third quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Herbal Care Corp., a distributor of herb-based sun screens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $40,000, 90-day loan from its bank to help meet cash requirements during the quarter. Since Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data has been assembled. a. On July 1, the beginning of the third quarter, the company will have a cash balance of $44,500. b. Actual sales for the last two months and budgeted sales for the third quarter follow: May (actual)……………………$250,000 June (actual)……………………300,000 July (budgeted)…………………400,000 August (budgeted)………………600,000 September (budgeted)…………..320,000 Past experiences show that 25% of a month’s sales are collected in the month of the sale, 70% in the month following the sale, and 3% in the second month following the sale. The remainder is uncollectible. c. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: July August September Merchandise purchases……..$240,000 $350,000 $175,000 Salaries and wages…………….45,000 50,000 40,000 Advertising…………………...130,000 145,000 80,000 Rent payments…………………. 9,000 9,000 9,000 Depreciation…………………...10,000 10,000 10,000 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $180,000. d. Equipment costing $10,000 will be purchased for cash during July. e. In preparing the cash budget, assume that the $40,000 loan will be made in July and repaid in September. Interest on the loan will total $1,200. BUDGETING -Worksheet Required: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. 2. Prepare a cash budget, by month and in total, for the third quarter. 3. If the company needs a minimum cash balance of $20,000 to start each month, can the loan be repaid as planned? Explain.  

Problem 7-25A Schedule of Expected Cash Collections; Cash Budget [LO7-2, LO7-8]

On January 1, 2020, Sarasota Company purchased 10% bonds having a maturity value of $380,000, for $410,343.38. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sarasota Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. Prepare the journal entry at the date of the bond purchase.Prepare a bond amortization schedule.Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020.Prepare the journal entry to record the interest revenue and the amortization at December 31, 2021.

DO YOU AGREE OR DISAGREE AND WHY?

The issue of physician geographic maldistribution and imbalance is a growing problem with a projected need of 46,100 to 90,400 physicians by 2025 (Shi, 88). The problem is multi-faceted, yet this discussion acknowledges physicians gravitated towards specialization (62%) instead of primary care (38%) according to the National Center for Health Statistics in 2015. Industrialized nations typically see at least half are generalists. Higher pay, better work hours, and prestige are believed to have lead to this imbalance. Metropolitan and suburban areas are better served than rural and inner-city populations that are thought of as the so called underserved populations (Ibid, 90).

Please compose a research paper of 3-5 pages (not including cover and references) about the future trends of Long Term Care in the next 10 years.

Hypothesize, how YOU think Long Term Care will be like in 2025 and support your theory with facts.

What trends do you think would develop to face the future challenges? What regulations will be established?

What laws will possibly be eliminated or reinforce if any?

In your paper, include all aspects of long term care such as SNF, Assisted Living, Home Care, Adult Day Care and Insurance Long term care reimbursement both private and public.