TAX 502 - Lesson Assignment #6: Penalty Taxes on Undistributed Corporate Income, Dividends and Other Nonliquidating Distributions

Reading

Text: Study Chapters 7 and 8 of the Bittker & Eustice text.

Assignments

The following Assignments should be completed and submitted to the course faculty via the learning platform for evaluation and grading. Submit your responses to these questions in one WORD document. List the question first, and then your response.

Copy the question, and then provide your answer on all of the following:

LESSON 6, PROBLEM #1

In not less than 1,000 words discuss "earnings and profits". Your discussion should include major differences between computing current earnings and profits and current taxable income as well as why earnings and profits should be calculated before a corporation decides to make a distribution to its shareholders.

LESSON 6, PROBLEM #2

Allan owns all of the stock of CadyCo. The stock’s basis is $100,000. CadyCo has a total of current and accumulated earnings and profits of $50,000. CadyCo distributes $200,000 cash to Allan “with respect to his stock” (i.e., as a state law “dividend”). How is the $200,000 taxed? What is Allan’s stock basis after the distribution? Alternatively, CadyCo distributes to Allan his note to CadyCo for $200,000 borrowed from CadyCo.

LESSON 6, PROBLEM #3

Assumptions: The stock of ChadCo is owned equally by two shareholders: SecondCo (a corporation) and Arnold (an individual). ChadCo and SecondCo use the accrual method, Arnold uses the cash method. All use a calendar taxable year. Assume § 1059 does not apply. Use a 34 percent corporate tax rate in this problem. During the current year, ChadCo accrued income and expenses as follows:

On December 24 of the preceding year, SecondCo and Arnold incorporated ChadCo and capitalized ChadCo with cash of $100,000 each. On December 31 of that preceding year, SecondCo and Arnold received distributions from ChadCo of $5,000 each; ChadCo did not earn any income for that year. In addition, SecondCo and Arnold received distributions of $5,000 each, in the current year.

Which distributions should be gross income to SecondCo and Arnold, in what amounts, and why? What does E&P have to do with this?

Alternative: Arnold just bought the ChadCo shares on December 30 of the current year from another shareholder for FMV of $145,000, before the declaration and payment of a

$5,000 distribution to Arnold on December 31 of the current year.

Should the distribution be taxable income to Arnold? Why?

Now assume that SecondCo’s basis in its ChadCo stock is $100,000 and Arnold’s basis in his ChadCo stock is $40,000. On January 2 of the current taxable year, ChadCo distributes $100,000 in cash to SecondCo and $100,000 in cash to Arnold. As of the end of the preceding taxable year, ChadCo’s accumulated E&P was zero.

What are the tax consequences of this distribution to ChadCo, SecondCo, and Arnold? [Hint: First compute ChadCo’s current-year taxable income and then compute current- year E&P before reducing the E&P for the distribution (“interim E&P”); after reducing for the distribution, compute final accumulated E&P.]

Variation: Assume Arnold’s shares were owned by a different shareholder every quarter and $50,000 was distributed ratably to all shareholders quarterly?

How much dividend would SecondCo and the holders of Arnold’s shares receive?

Suppose under the basic facts in (3) above that ChadCo had an accumulated deficit of

$100,000 in its E&P account as of December 31 of the preceding taxable year.

If, on December 1 of the current year (the declaration date), ChadCo’s board of directors voted to pay the $200,000 distribution by mailing the checks on December 31 of the current taxable year (the payment date, the identification of which is a practice generally used only by widely held corporations) to shareholders of record on December l5 of the current taxable year (the record date), such checks actually being received by SecondCo and Arnold in the mail on January 2 of the next year? Assume that SecondCo and Arnold are the public and that they are the only shareholders (as in the basic facts).

How would your answer to (3) above change?

Suppose that SecondCo is an individual and that ChadCo has always been an S corporation.

What is ChadCo’s E&P‘? How is each shareholder’s personal income tax return affected for the current year by the tax items of ChadCo?   How will ChadCo distribution of

$100,000 to each shareholder in the current year affect shareholders?

Question 2 Qui Limited was incorporated in Nova Scotia on May 21, 1936. The corporation has never carried on business in Canada, but held its annual directors' meeting in Nova Scotia each year from 1936 through 1966. Which one of the following best describes Qui Limited's residency status for Canadian income tax purposes for 2018? Question 2 options:

1) A full-time resident

2) A part-time resident

3) A deemed resident (sojourner)

4) A non-resident

Question 3 Which of the following statements about the ITA and related procedures is correct? Question 3 options:

1) There is no statutory definition of the word "income" in the ITA.

2) Courts always make decisions based on GAAP.

3) In tax matters, CRA always has the burden of proving that an assessment is incorrect.

4) An appeal in the Federal Court of Appeal must be made within 60 days from the date of the Tax Court of Canada decision.

Question 4 An overloaded external auditor takes home the audit work related to a client's taxation. Due to time pressure, the auditor asks her husband, who is an accountant too but working for another company, to help her in completing the working papers. Which of the following best describes your assessment of the auditor's action? Question 4 options:

1) This is acceptable because her husband is not working for her client.

2) She has most likely violated Canadian Auditing Standards (CAS) only.

3) She has most likely violated the CPA-Alberta Rules of Professional Conduct only.

4) She has most likely violated both CPA-Alberta Rules of Professional Conduct and CAS.

Question 5 Individuals must file their income tax returns: Question 5 options:

1) On a quarterly basis if self employed or spouse is self-employed.

2) June 15 if self-employed or spouse is self-employed.

3) If an individual's date of death is December 15, by April 30 of the following calendar year.

4) If an individual's date of death is November 15, by April 30 of the following calendar year.

Question 6 In citing the general restriction on expenses against business or property income, you would refer to: Question 6 options:

1) Subsection 18(1)a)

2) Subparagraph 18(1)a)

3) Paragraph 18(1)a)

4) Clause 18(1)a)

Question 7 Ontario Manufacturing Company is a company incorporated in the United States. It employs salespeople who live in Canada but does not have an office or any establishment bearing the company name in Canada. The salespeople visit Canadian customers, who then order from Ontario Manufacturing Company and receive goods directly from the United States. Which of the following best describes the tax status in Canada of Ontario Manufacturing Company? Question 7 options:

1) Ontario Manufacturing Company is not taxable in Canada, because it does not have a permanent establishment in Canada.

2) Ontario Manufacturing Company is subject to a withholding tax under Part XIII of the Income Tax Act on its gross revenue in Canada.

3) Ontario Manufacturing Company is subject to tax only on its Canadian sales because the location of company employees in Canada implies that there is a permanent establishment.

4) Ontario Manufacturing Company is subject to a withholding tax under Part XIII of the Income Tax Act on its net income earned in Canada.

Question 8 Amy lives in Detroit, Michigan, USA. She commutes daily to Windsor, Ontario, Canada, where she is employed by Ford Motor Company of Canada Limited. She works 9 am to 5 pm, Monday through Friday. Which one of the following best indicates Amy's residency status for Canadian income tax purposes for 2018? Question 8 options:

1) A full-time resident

2) A part-year resident

3) A deemed resident (sojourner)

4) A non-resident

Question 9 An auditor reviewing ABC Corporation discovered that $100,000 of corporate revenue was being deliberately recorded in the books as a debit to Bank and a credit to shareholders loan. Which of the following statements is true? Question 9 options:

1) This transaction is an example of tax avoidance.

2) This transaction is an example of tax planning.

3) This transaction does not fit any the above categories.

4) This transaction is an example of tax evasion.

Question 10 ABC Inc. is a private corporation incorporated in Canada in 1991. All of its income is derived from sources originating in New Zealand. All the ABC shareholders reside permanently in the United States, where they make all the major decisions for the company. Which of the following accurately describes ABC's tax status in Canada? Question 10 options: 1) ABC is not a resident of Canada and is taxed in Canada only on income earned from its permanent establishment in Canada.

2) ABC is a resident of Canada and taxed in Canada on its world income.

3) ABC is not a resident of Canada and is not subject to tax in Canada.

4) ABC is not a resident of Canada but is subject to a withholding tax on dividends paid to its shareholders in the United States.

Please read the following article: China's Shirt Factories Invest in Efficiency as Wages Rise:

One thousand one hundred and sixteen seconds. That's exactly how long 1t should take to stitch together a men's dress shirt, according to Eugene Lee, a plant manager at Hong Kong's TAL Group. He knows, because his job is to get the production line at the factory he oversees in Dongguan, China, to run with Japanese-style precision. Each team of about 30 workers is assigned targets. Attaching a collar? That should take 23 seconds. A cuff? Twenty seconds. Lee's line supervisors will sometimes stand behind workers at sewing machines, stopwatch in hand, to assess whether a team's working too fast or too slow. The information is posted on a whiteboard, so managers can identify bottlenecks. "In the old days a leader used a gut feel, but a lot of times the analysis was incorrect," says Lee. "We're using real data." T AL is one of several companies trying to squeeze more productivity from its Chinese workforce. The effort by factory operators in industries such as apparel, toys, and electronics is largely a response to rising labor costs. According to the National Bureau of Statistics of China, urban manufacturing wages rose 73 percent from 2009 to 2013, the latest year for which data is available. "You can't waste labor, because wages are too high now," says Shaun Rein, managing director of Shanghai-based China Market Research and author of The End of Copycat China. "The typical Chinese worker is about a quarter as efficient as a German or an American factory worker," he says. For companies looking to boost productivity, Rein says, "there's a lot oflow-hanging fruit," such as investing in worker training and automation.

One of the world's largest makers of men's dress shirts, privately held TAL has more than 25,000 workers in China, Vietnam, and other Southeast Asian countries and logged sales of $850 million in 2014. Customers include Burberry, LL.Bean, and Eddie Bauer. Like other apparel makers, TAL is adapting to the rise of fast fashion. H&M and Zara introduce styles every few weeks, spurring other retailers to step up their own schedules. Orders are smaller and more complex. A men's dress shirt that used to come in one standard fit might now be available in classic, slim, and extra slim. Brands and suppliers have to work together more closely, says Jim Ditzel, senior vice president for supply chain at LL.Bean. "It used to be they would just cut and sew for us," he says of T AL. The two companies now also "share information on trends, what they see in the marketplace, and what we are seeing." Another feature of today's high-velocity retail environment is that customers are much less tolerant of delivery delays. "In a two-season year, [merchandise] would be on the shelf for six months, so if you missed the delivery deadline by two weeks, it was no big deal," says T AL Chief Executive Officer Roger Lee. Nowadays, some customers assess a 10 percent penalty if a shipment is even one day late. "And on top of that, we have to air ship the goods ourselves-at our own expense," Lee says. Borrowing from lean manufacturing, a concept popularized by Toyota Motor and other Japanese companies, T AL is running more-but smaller-production lines. That way a problem with one worker or machine might affect only tens of items rather than hundreds. Teams are a third the size they used to be, and pay is based on the team's output rather than the worker's. Each team has a floating member (called a water spider, "because they jump all over the place," says factory manager Lee) who can perform various tasks, whether assisting a colleague who's fallen behind or fetching labels.

As they invest more in training, companies have more to lose from employee turnover-and greater incentive to treat employees better. "No workers will come and join a factory" if conditions are poor, says Allan C.K. Chan, associate head of the Institute of Textiles and Clothing at Hong Kong Polytechnic University. Still, the new world of shorter production schedules takes its toll, according to Geoffrey Crothall, communications director at China Labour Bulletin in Hong Kong. "All the pressure that supplier factories get from brands gets transferred down to the workers," he says. "The line supervisor is under pressure to ensure quality control and bulk deliverv, all in the short time required.

Write a 500 Word document responding to the following questions:

Does the use of e-commerce data and information sharing has a positive impact on manufacturing productivity, efficiency, and external logistics infrastructure?

What is a feature of today’s high-velocity retail environment that customers are much less tolerant of?

What is the output-to-input ratio measure?

Jurica Corporation manufactures various trim pieces for vehicle manufacturers. The company has a number of plants, including the Juriquilla Plant, which makes door trim pieces.

Mr. Bates is both the regional manager for the Central America region and the plant manager of the Juriquilla Plant. His budget as the regional manager is charged to the Juriquilla Plant.

Bates has just heard that the company received a bid from an outside vendor to supply the equivalent of the entire annual output of the Juriquilla Plant for $20.5 million. Bates is astonished at the low outside bid because the budget for the Juriquilla Plant’s operating costs for the upcoming year is $24.16 million. If this bid is accepted, the Juriquilla Plant will be shut.

The budget for the Juriquilla Plant’s operating costs for the coming year is presented below.

*Fixed corporate expenses allocated to plants and other operating units based on total budgeted wage and salary costs.

Additional facts regarding the plant’s operations are as follows:

1. Due to Juriquilla’s commitment to use high-quality fabrics in all of its products, the Purchasing Department was instructed to place yearly purchase orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders are canceled as a consequence of the plant closing, termination charges would amount to 20% of the cost of direct materials.

2. Approximately 300 plant employees will lose their jobs if the plant is closed. This includes all of the direct laborers and supervisors as well as the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some would be able to find new jobs while many others would have difficulty. All employees would have difficulty matching Jurquilla’s base pay of $11.50 per hour, which is the highest in the area. A clause in Juriquilla’s current contract with the union may help some employees; the company must provide employment assistance to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be $0.79 million for the year.

3. Some employees would probably choose early retirement because Jurica Corporation has an excellent pension plan. In fact, $0.61 million of the annual pension expense would continue whether the Juriquilla plant is open or not.

4. Bates and his staff would not be affected by the closing of the Juriquilla Plant. They would still be responsible for administering three other area plants.

5. If the Juriquilla Plant were closed, the company would realize about $3.68 million salvage value for the equipment and building. If the plant remains open, there are no plans to make any significant investments in new equipment or buildings. The old equipment is adequate and should last indefinitely.

Required:

1. Before looking at the numbers, discuss the human factors and other non-numerical factors that are at play when considering a make or buy decision of this magnitude?  

2. Jurica Corporation plans to prepare a financial analysis that will be used in deciding whether or not to close the Denver Cover Plant. Management has asked you to identify:

1. The annual budgeted costs that are relevant to the decision regarding closing the plant.
2. The annual budgeted costs that are not relevant to the decision regarding closing the plant.
3. Any nonrecurring costs that would arise due to the closing of the plant.

3. Looking at the data you have prepared in (1) above,

1. Calculate the financial advantage (disadvantage) of closing the plant. You should calculate this for both the first year and the years after the first year.

2. Based on your analysis as a manager should the plant be closed. Discuss your decision.

Your work should be submitted in full and grammatically correct sentences.

Calculations should be organized into tables that are easy to follow. If you have a mistake in your work but I cannot understand your calculations, I cannot give partial credit.

Grading Rubric:

Question：Consider the following statement, “The Morrison government this week announced $3.8 billion of infrastructure projects would be pulled forward or given additional funding over the next four years.”

Show the effects of these changes using the aggregate expenditure (AE)model on real GDP in the short run. In your answer make sure to discuss the linkages in stimulating change and the equilibrating process of moving to a new macroeconomic equilibrium output.

（word limit: 300-400)

Thank you!

The related information:

The Australian economy is "weak",with households weighed down by slow wages growth and higher taxes,the OECD has declared in a report that backs lower interest rates,calls for more government spending and paves the way for unconventional monetary policies.

In its six-monthly review of the global economy,the Paris-based think tank has sharply downgraded its expectations for Australia while raising serious concerns about the level of debt being carried by households.

The Morrison government this week announced $3.8 billion of infrastructure projects would be pulled forward or given additional funding over the next four years. The decision followed calls from the Reserve Bank of Australia (RBA),which has sliced official interest rates to a record low 0.75 per cent,for a lift in public spending plus productivity-enhancing structural reforms.

But economists have warned the new spending will equate to less than 0.1 per cent of gross domestic product (GDP),arguing much more needs to be done to get the economy growing fast enough to bring down the national unemployment rate.

The Organisation for Economic Co-operation and Development (OECD),which noted the global economy was now growing at its slowest rate since the global financial crisis,said it expected Australian GDP to expand by 2.3 per cent this year and next,well short of the federal

government's forecast.

It also expects private consumption,which accounts for about 60 per cent of total economic activity,to barely grow faster than inflation over the next two years.

In March,the OECD was expecting unemployment to start edging down. It has now lifted its forecasts,tipping unemployment to average 5.3 per cent in 2020.

"Economic activity has been weak," the OECD said about Australia. "Private consumption spending has been sluggish,weighed down by slow wage growth and an increase in taxes paid by households."

While the government has argued its recent tax cuts will help households offset slow wages growth,the OECD and other organisations such as the RBA have noted overall tax levels are increasing as the budget returns to surplus.

Research this week from National Australia Bank found Australian household debt was now at a record high of 202 per cent of annual income.

The OECD said high household indebtedness could "exacerbate" any economic shock that hit Australia.

It said with the RBA likely to cut interest rates further,which in turn could feed into a lift in house prices,lending standards might have to be tightened to protect households.

"High household indebtedness means that the authorities should stand ready to tighten macro- prudential policy settings if lower interest rates fuel house price inflation through a sharp pick- up in credit," the OECD found.

While expecting further rate cuts,the organisation said the Morrison government should "loosen fiscal policy" to help get the economy growing faster.

"Fiscal policy is expected to provide little support to economic growth,in accordance with the federal government's commitment to future budget surpluses," it said. "A more expansionary fiscal stance may be warranted given that the economy is growing well below its potential and the relatively low public debt burden.

"At the same time,growth-enhancing tax reforms should be prioritised. These include shifting the tax mix away from direct taxes and inefficient taxes like real estate stamp duty to the GST and land taxation."

Treasurer Josh Frydenberg said the nation's economic fundamentals remained sound,with the country now in its 29th consecutive year of growth.

He said there were "headwinds",particularly due to trade policy tensions that have hit confidence and business investment globally since May,but "the government's focus on productivity-enhancing reform will ensure our economy remains resilient".

"The international challenges are a stark reminder of why we must stick to our economic plan which has delivered lower taxes so you can keep more of what you earn,more infrastructure to boost productivity and which will return the budget back to surplus so we can meet the challenges that lie ahead," he said.

Lindsey was recently hired by Swift Ltd. as a junior budget analyst. She is working for the Venture Capital Division and has been given for capital budgeting projects to evaluate. She must give her analysis and recommendation to the capital budgeting committee.

Lindsey has a B.S. in accounting from CWU (2014) and passed the CPA exam (2017). She has been in public accounting for several years. During that time she earned an MBA from Seattle U. She would like to be the CFO of a company someday--maybe Swift Ltd.-- and this is an opportunity to get onto that career track and to prove her ability.

As Lindsey looks over the financial data collected, she is trying to make sense of it all. She already has the most difficult part of the analysis complete -- the estimation of cash flows. Through some internet research and application of finance theory, she has also determined the firm’s beta.

Here is the information that Lindsey has accumulated so far:

The Capital Budgeting Projects

She must choose one of the four capital budgeting projects listed below:  

Table 1

Table 1 shows the expected after-tax operating cash flows for each project. All projects are expected to have a 4 year life. The projects differ in size (the cost of the initial investment), and their cash flow patterns are different. They also differ in risk as indicated in the above table.

The capital budget is $20 million and the projects are mutually exclusive.

Capital Structures

Swift Ltd. has the following capital structure, which is considered to be optimal:

Cost of Capital

Lindsey knows that in order to evaluate the projects she will have to determine the cost of capital for each of them. She has been given the following data, which he believes will be relevant to her task.

(1)The firm’s tax rate is 35%.

(2) Swift Ltd. has issued a 8% semi-annual coupon bond with 14 years term to maturity. The current trading price is $960.

(3) The firm has issued some preferred stock which pays an annual 8.5% dividend of $50 par value, and the current market price is $52.

(4) The firm’s stock is currently selling for $35 per share. Its last dividend (D₀) was $2.00, and dividends are expected to grow at a constant rate of 5%. The current risk free return offered by Treasury security is 2.8%, and the market portfolio’s return is 10.80%. Swift Ltd. has a beta of 1.1. For the bond-yield-plus-risk-premium approach, the firm uses a risk premium of 3.5%.

(5) The firm adjusts its project WACC for risk by adding 2.5% to the overall WACC for high-risk projects and subtracting 2.5% for low-risk projects.

Lindsey knows that Swift Ltd. executives have favored IRR in the past for making their capital budgeting decisions. Her professor at Seattle U. said NPV was better than IRR. Her textbook says that MIRR is also better than IRR.   She is the new kid on the block and must be prepared to defend her recommendations.

First, however, Lindsey must finish the analysis and write her report. To help begin, she has formulated the following questions:

1. What is the firm’s cost of debt?

2. What is the cost of preferred stock for Swift Ltd.?

3. Cost of common equity

(1) What is the estimated cost of common equity using the CAPM approach?

(2) What is the estimated cost of common equity using the DCF approach?

(3) What is the estimated cost of common equity using the bond-yield-plus-risk-premium approach?

(4) What is the final estimate for r_s?

4. What is Swift Ltd.’s overall WACC?

5. Do you think the firm should use the single overall WACC as the hurdle rate for each of its projects? Explain.

6. What is the WACC for each project? Place your numerical solutions in Table 2.

7. Calculate all relevant capital budgeting measures for each project, and place your numerical solutions in Table 2.

Table 2

8. Comment on the commonly used capital budgeting measures. What is the underlying cause of ranking conflicts? Which criterion is the best one, and why?

9. Which of the projects are unacceptable and why?

10. Rank the projects that are acceptable, according to Lindsey’s criterion of choice.

11. Which project should Lindsey recommend and why? Explain why each of the projects not chosen was rejected.

Instructions

1.Your answers should be Word processed, submitted via Canvas.

2.Questions 5, 8, 9, and 11 are discussion questions.

3.Place your numerical solutions in Table 2.

4.Show your steps for calculation questions.

BENEFIT ENROLLMENT PERIOD

Background Information:

You work for Baxter Company and need to announce the benefit enrollment period.
Based on last year’s enrollment period, you are concerned about the attitude of employees. They don’t seem to realize that changes to health, dental, and life insurance programs can be made only once a year, during the month of May.

You’ll need to let your audience know that most of the benefit program is unchanged. However, dental coverage is a little different; two carriers (Quality Care and Health Alliance) now offer a dental coverage option. Employees can also increase coverage in life insurance for their family members, and health coverage will now include both a basic plan and a prudent buyer plan. You do not have to describe these changes; just encourage employees to read about them in an email to be sent in early April---see instructions for the exact date.

Your boss, Jonathon, asks you to schedule and announce a day early in April when representatives from Human Resources will be available to answer employee questions about the changes. He suggests these question-and-answer sessions be held in the East Lounge, and each session should be held at different times of the day: Dental insurance changes from 8:30 to10:30 a.m., Health insurance changes from 1 to 3 p.m., and Life insurance changes from 3 to 5 p.m.

Your Task:

Write an informational memo report to your employees announcing changes to their benefit coverage and the enrollment deadline. This is important because employees may make changes to their benefits only during this period. The deadline for changes is May 31.

First, read the attached file.

Second, prepare this message as an informational memo report, addressed to All Employees and sent from you, the Benefits Choice Manager. Date the informational report, and be sure to include a useful subject line; useful subject lines capture the essence of the report's content. Refer to the Guffey text for review.

Third, pick the meeting date (and use facts given regarding times ) in the case. You can refer to The Gregg Reference Manual for proper presentation of timeframes when using a.m. and p.m. in your message. Also, be sure to mention the location given in the case. When listing the times for each meeting, you will create a 3-item bulleted list; use bullets for each benefit to be discussed. You must figure out the best way to present this bulleted list.

Next, you must follow the Standard Memo Report Procedure document (and its supplement) for layout/format of your informational report. In this message, you will not use major or subsection breaks or continuation page headings. That is, it will be a maximum one page in length. Also, note that business reports contain no formal salutation and no complimentary close. Furthermore, your name and job title are typed as the content of the FROM: header near the top of the page; and your job title belongs on the same line as your typed name.

Finally, the opening paragraph [Introductory section] of your report will clarify for the reader exactly what content is coming in the discussion section of the report. The [Discussion section] will contain the facts you wish to present to your readers and will be from 1 - 4 paragraphs in length---in this case, shorter is better. Be sure to indicate the highlights of the coming changes that will be contained in an email to be sent on April 5. Your final paragraph [Closing section] will contain information about what the reader must do with the information. In this case, the action will be an invitation to attend one or more of the informational sessions at the times and in the location specified. Additionally, you will tell your employees what action to take if they cannot make it to the meetings they wish to attend.

Shown below is a model of how your finished report might look: [The model shows a one-paragraph introductory section, a two-paragraph discussion section, and a one-paragraph closing section; Your final report may vary based on the amount of information written in the discussion section.] You should be able to fit all of the necessary information on one page.

TO:          All Employees

FROM:      Your Name, Your Job Title

DATE:      March 27, 2013

SUBJECT: XXXXXXXXXXXXXXXXXXXXXXXXXX (all uppercase)                  *****Make sure you create a useful subject line---one that captures the essence of the report's content*****

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Name this Word document Benefit Choice Your First Name Your Last Name. Submit.

PLEASE SHOW WORK IN EXCEL THANK YOU!

Green-Log Manufacturing

Capital Budgeting Analysis

In 1997 Michelle Green started Green-Log Manufacturing, a company dedicated to manufacturing environmental friendly man made logs that can be burned in fire places, fire pits in the backyard, and when camping. The logs are made from environmental friendly products like cardboard and clean wax and emit fewer greenhouse gases and less harsh chemicals. The logs come in three pound and five pound sizes. Green-logs are also available with citronella to ward off mosquitos. The Green-Logs have been well received. Revenue and profits have grown steadily.

Based on the recommendation from her sales and marketing department Ms. Green is considering adding a new product line of Green-Log fire starters. These fire starters would be ideal for the outdoor market of camping, fishing, backpacking, and tailgating. Ms. Green has asked her sales and marketing team to come up with a sales forecast for units and pricing. She has also asked her manufacturing team to come up with alternatives for the production of the fire starters including what equipment is needed and what the projected costs would be.

The sales and marketing team hired Smith and Smith Consulting to conduct a market survey. The total cost for this consulting was $32,500. Based on the survey and their own experience the sales and marketing has provided a sales forecast. The suggested price of the fire starter is $2.50 per starter and they would be sold as a four pack for $10.00. The unit sales forecast is 20,000 4-packs in year 1, 45,000 in year 2, 60,000 in year 3, 75,000 in year 4, and then increasing by 5,000 each year thereafter. Sales and marketing expenses are expected to be 10% of total revenue.

The production team forecasts that the fixed costs needed for the fire starter production line will be $90,000 per year. Variable costs for materials (cardboard, wood shavings, wax, packaging, etc.) will be $0.85 per unit or $3.40 per four pack. The labor and maintenance costs will vary based on what equipment will be purchased.

There are two brands of equipment that will do the job; The ABC brand and the XYZ brand.

The ABC brand is more expensive, but higher quality and more efficient. It will cost $525,000 plus an additional $30,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years and would be sold then for $55,000. Maintenance of the ABC equipment would cost $5,000 per year but every 3 years the equipment would need an overhaul that would increase the cost to $75,000 for that year. Since the ABC equipment is more efficient the variable labor cost would be $0.60 per four pack.

The XYZ brand is less expensive. It will cost $395,000 plus an additional $40,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years and would be sold then for $35,000. Maintenance of the ABC equipment would cost $10,000 per year but every 3 years the equipment would need an overhaul that would increase the cost to $85,000 for that year. The variable labor cost with the XYZ brand equipment would be $0.80 per four pack.

The increase in working capital (accounts receivable and inventory) is expected to be $60,000 at the beginning of the project and will be the same for both machines. The company’s cost of capital is 14% and its tax rate is 40%. Since her production team believes that both brands of equipment will last for eight years Michelle wants this analyzed as an eight year project.

Michelle has always believed in buying quality so she is leaning towards the ABC brand equipment. But after hearing that you have learned about capital budgeting in your Finance class at UVU she wants to take advantage of your expertise. Michelle has asked you to analyze her choices and give her some advice on which option would provide the best financial outcome for Green-Log Manufacturing.

Prepare an analysis and professional report for Michelle. The report should be professionally written and include a two page letter, plus attached schedules. The letter should explain what analytical techniques you are using, why you are using those techniques, what the results show, what you would recommend to Michelle and why. Make sure that the letter is well organized and professionally written. Also make sure that the letter includes the following:

1.         The cash flows associated with the different equipment brands for each year of the           project.

2.         The PB period, Discounted PB, IRR, and NPV for the two alternatives.

3.         Your recommendation of which brand of equipment should be purchased.

4.         Attach to your letter schedules that show your analysis and your work.

            Please submit files. A Word file with your letter and an Excel file with your analysis.

In 1997 Michelle Green started Green-Log Manufacturing, a company dedicated to manufacturing environmental friendly man made logs that can be burned in fire places, fire pits in the backyard, and when camping. The logs are made from environmental friendly products like cardboard and clean wax and emit fewer greenhouse gases and less harsh chemicals. The logs come in three pound and five pound sizes. Green-logs are also available with citronella to ward off mosquitos. The Green-Logs have been well received. Revenue and profits have grown steadily.

Based on the recommendation from her sales and marketing department Ms. Green is considering adding a new product line of Green-Log fire starters. These fire starters would be ideal for the outdoor market of camping, fishing, backpacking, and tailgating. Ms. Green has asked her sales and marketing team to come up with a sales forecast for units and pricing. She has also asked her manufacturing team to come up with alternatives for the production of the fire starters including what equipment is needed and what the projected costs would be.

The sales and marketing team hired Smith and Smith Consulting to conduct a market survey. The total cost for this consulting was $32,500. Based on the survey and their own experience the sales and marketing has provided a sales forecast. The suggested price of the fire starter is $2.50 per starter and they would be sold as a four pack for $10.00. The unit sales forecast is 20,000 4-packs in year 1, 45,000 in year 2, 60,000 in year 3, 75,000 in year 4, and then increasing by 5,000 each year thereafter. Sales and marketing expenses are expected to be 10% of total revenue.

The production team forecasts that the fixed costs needed for the fire starter production line will be $90,000 per year. Variable costs for materials (cardboard, wood shavings, wax, packaging, etc.) will be $0.85 per unit or $3.40 per four pack. The labor and maintenance costs will vary based on what equipment will be purchased.

There are two brands of equipment that will do the job; The ABC brand and the XYZ brand. The ABC brand is more expensive, but higher quality and more efficient. It will cost $525,000 plus an additional $30,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years and would be sold then for $55,000. Maintenance of the ABC equipment would cost $5,000 per year but every 3 years the equipment would need an overhaul that would increase the cost to $75,000 for that year. Since the ABC equipment is more efficient the variable labor cost would be $0.60 per four pack.

The XYZ brand is less expensive. It will cost $395,000 plus an additional $40,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years and would be sold then for $35,000. Maintenance of the ABC equipment would cost $10,000 per year but every 3 years the equipment would need an overhaul that would increase the cost to $85,000 for that year. The variable labor cost with the XYZ brand equipment would be $0.80 per four pack. The increase in working capital (accounts receivable and inventory) is expected to be $60,000 at the beginning of the project and will be the same for both machines. The company’s cost of capital is 14% and its tax rate is 40%. Since her production team believes that both brands of equipment will last for eight years Michelle wants this analyzed as an eight year project.

Michelle has always believed in buying quality so she is leaning towards the ABC brand equipment. But after hearing that you have learned about capital budgeting in your Finance class at UVU she wants to take advantage of your expertise. Michelle has asked you to analyze her choices and give her some advice on which option would provide the best financial outcome for Green-Log Manufacturing.

Prepare an analysis and professional report for Michelle. The report should be professionally written and include a two page letter, plus attached schedules. The letter should explain what analytical techniques you are using, why you are using those techniques, what the results show, what you would recommend to Michelle and why. Make sure that the letter is well organized and professionally written. Also make sure that the letter includes the following:

1. The cash flows associated with the different equipment brands for each year of the project.

2. The PB period, Discounted PB, IRR, and NPV for the two alternatives.

3. Your recommendation of which brand of equipment should be purchased.

4. Attach to your letter schedules that show your analysis and your work. Please submit files. A Word file with your letter and an Excel file with your analysis.

In many workplaces ranging from Fortune 500 to small enterprises, workplace communication takes place over instant messaging. The leading platform in this space is Slack, a cloud-based team collaboration tool. Messages are organized by private and public channels and users can chat, share documents, browse through past messages, and collaborate with each other. Slack is solidifying the role of instant messages in the workplace and even if you end up in a company that does not use Slack, it is likely that you will end up using one of its competitors.

Slack has an interesting founding story: Stewart Butterfield, who is also a co-founder of the image hosting service Flickr, founded the video game company Tiny Speck and released the game Glitch in 2011. As part of their game development process, the company also built a team communication platform, allowing software developers to communicate with each other while building Glitch. Glitch was shut down after a year, but the company devoted itself to the full-scale development of their communication tool, which resulted in Slack. Through word of mouth, Slack acquired 16,000 users in its beta stage, and the product was fully released in 2014. Four years later, the company boasts 50,000 companies and 6 million users. The company expects to surpass e-mail use in the workplace by 2025.

Using instant messaging organized by private and public channels is changing how people communicate in the workplace, sometimes for the better, and sometimes for the worse. On the upside, Slack often receives feedback from users who identify as shy and introverted, stating that this tool allows them to participate more in team conversations. Anna Pickard, Creative Director of Voice and Tone, at Slack, also observes that messaging makes communication more humane and natural. Communication no longer takes place between small groups of people over e-mail. Instead, it occurs in channels that are searchable and are organized by team or topic. People can reach out to and connect with people they would not otherwise. Many companies have an "ask me anything" channel where employees may post messages and high-level managers may answer, resulting in greater transparency and accessibility to upper management, helping to create a sense of belonging.

At the same time, technology sometimes amplifies communication problems that also occur in person, and creates new ones of its own. If you have ever written a chat message and instantly regretted it, you can imagine the problems that may occur at scale in the workplace. The instantaneous nature of chat can make people less deliberate and careful about their messages. There are also examples of private feedback given in an open channel, resulting in a public shaming of an employee. Slack conversations, even if they are in private channels, can be read by the employer, and may result in adverse employment actions against the employee. There is no "forward" button on instant messages, but it is all too easy to take a screen shot of the conversation and share with others, resulting in Slack leaks, similar to e-mail leaks. Additionally, there is also user error—in e-mail it is relatively easy to find out who the recipients of the e-mail are, but on Slack, people may pay less attention to who is on that channel, and others may join the channel at a later point, suggesting that the audience for the posts will evolve and can grow over time. People may confuse which channel they are on, and post messages intended for a small group to a broad audience.

As Slack grows, it develops its own etiquette. For example, hitting "enter" after every sentence is often mentioned as a no-no, and a pet peeve of heavy users. Senders are expected to complete their message and then hit enter in one go. Other habits may result in productivity losses—spending time in private chats as opposed to working is one way in which Slack and tools like it may result in productivity losses. One company banned the use of Slack during meetings, as people were having back-channel conversations during the meeting, which was distracting and affecting engagement in the meeting. How these tools are used are shaped by the office culture, and in turn will have an impact on communication culture in the workplace.

1. If you were to create a social media policy including Slack, what types of rules would you include and why?  

2. What types of messages do you believe are appropriate to communicate via Slack? For what type of communication is this tool less useful?

3. What type of communication barriers exist when workplace communication takes place over Slack and similar sources?

4. What are the implications of Slack and similar communication tools in affecting the sense of belonging that employees experience in the workplace?

5. Based on reading this case and your general experience with similar tools, what advice would you give to an employee who will start working in a company using Slack?

1. Include the bold headings below.
2. Summary: Provide a brief summary listing the key facts in the case.
3. Case Discussion Questions: Include each question before your response. Write a detailed and researched reply to each of the Case Discussion Questions found at the end of the case study.
4. Conclusion: Write a conclusion and include a separate reference page.

Can anyone help on this?.Thanks.