Robert Montoya, Inc., is a leading producer of wine in the United States. The firm was founded in 1950 by Robert Montoya, an Air Force veteran who had spent several years in France both before and after World War II. This experience convinced him that California could produce wines that were as good as or better than the best France had to offer. Originally, Robert Montoya sold his wine to wholesalers for distribution under their own brand names. Then in the early 1950s, when wine sales were expanding rapidly, he joined with his brother Marshall and several other producers to form Robert Montoya, Inc., which then began an aggressive promotion campaign. Today, its wines are sold throughout the world.

            The table Wine market has matured and Robert Montoya's wine cooler sales have been steadily decreasing. Consequently, to increase winery sales, management is currently considering a potential new product: a premium red wine using the cabernet sauvignon grape. The new wine' is designed to appeal to middle-to-upper-income professionals. The new product, Suave Mauve, would be positioned between the traditional table wines and super premium table wines. In market research samplings at the company's Napa Valley headquarters, it was judged superior to various competing products. Sarah Sharpe, the financial vice president, must analyze this project, along with two other potential investments, and then present her findings to the company's executive committee.

            Production facilities for the new wine would be set up in an unused section of Robert Montoya's main plant. New machinery with an estimated cost of $1,800,000 would be purchased, but shipping costs to- move the machinery to Robert Montoya's plant would total $80,000, and installation charges would add another $120,000 to the total equipment cost. Furthermore, Robert Montoya's inventories (the new product requires aging for 5 years in oak barrels made in France) would have to be increased by $100,000. This cash flow is assumed to occur at the time of the initial investment. The machinery has a remaining economic life of 4 years, and the company has obtained a special tax ruling that allows it to depreciate the equipment under the MACRS 3-year class life. Under current tax law, the depreciation allowances are 0.33, 0.45, 0.15, and 0.07 in Years 1 through 4, respectively. The machinery is expected to have a salvage value of $200,000 after 4 years of use.

            The section of the plant in which production would occur had not been used for several years and, consequently, had suffered some deterioration. Last year, as part of a routine facilities improvement program, $300,000 was spent to rehabilitate that section of the main plant. Earnie Jones, the chief accountant, believes that this outlay, which has already been paid and expensed for tax purposes, should be charged to the wine project. His contention is that if the rehabilitation had not taken place, the firm would have had to spend the $300,000 to make the plant suitable for the wine project.

            Robert Montoya's management expects to sell 125,000 bottles of the new wine in each of the next 4 years, at a wholesale price of $50 per bottle, but $30 per bottle would be needed to cover cash operating costs. In examining the sales figures, Sharpe noted a short memo from Robert Montoya's sales manager which expressed concern that the wine project would cut into the firm's sales of other wines-this type of effect is called cannibalization. Specifically, the sales manager estimated that existing wine sales would fall by 5 percent if the new wine were introduced. Sharpe then talked to both the sales and production managers and concluded that the new project would probably lower the firm's existing wine sales by $60,000 per year, but, at the same time, it would also reduce production costs by $40,000 per year, all on a pre-tax basis. Thus, the net externality effect would be -$60,000 + $40,000 = -$20,000. Robert Montoya's federal-plus-state tax rate is 25 percent, and its overall cost of capital is 10 percent, calculated as follows:

                                    WACC = W_d r _d (1-T) + W_sr_s

                                                = 0.5(10%) (0.6) + 0.5(14%)

                                                = 10%.

            Now assume that you are Sharpe's assistant and she has asked you to analyze this project, along with two other projects, and then to present your findings in a "tutorial" manner to Robert Montoya's executive committee. As financial vice president, Sharpe wants to educate some of the other executives, especially the marketing and sales managers, in the theory of capital budgeting so that these executives will have a better understanding of capital budgeting decisions. Therefore, Sharpe wants you to ask and then answer a series of questions as set forth next. Keep in mind that you will be questioned closely during your presentation, so you should understand every step of the analysis, including any assumptions and weaknesses that may be lurking in the background and that someone might spring on you in the meeting.

A. Define the term "incremental cash flow," Since the project will be financed in part by debt, should the cash flow statement include interest expenses? Explain.

B. Should the 300,000 that was spent to rehabilitate the plant be included in the analysis?

C. Suppose another winemaker had expressed an interest in leasing the wine production site for $30,000 per year. If this were true (in fact it was not), how would that information be incorporated into the analysis?

D. What is Robert Montoya's Year 0 net investment outlay on this project? What is the expected nonoperating cash flow when the project is terminated in year 4?

STAT 200 Week 1 Homework Problems

1.1.4 To estimate the percentage of households in Connecticut which use fuel oil as a heating source, a researcher collects information from 1000 Connecticut households about what fuel is their heating source. State the individual, variable, population, sample, parameter, and statistic

1.1.8 The World Health Organization wishes to estimate the mean density of people per square kilometer, they collect data on 56 countries. State the individual, variable, population, sample, parameter, and statistic

1.2.4 You wish to determine the GPA of students at your school. Describe what process you would go through to collect a sample if you use a stratified sample.

1.3.4 To evaluate whether a new fertilizer improves plant growth more than the old fertilizer, the fertilizer developer gives some plants the new fertilizer and others the old fertilizer. Is this an observation or an experiment? Why?

1.3.10 A mathematics instructor wants to see if a computer homework system improves the scores of the students in the class. The instructor teaches two different sections of the same course. One section utilizes the computer homework system and the other section completes homework with paper and pencil. Are the two samples matched pairs or not? Why or why not?

1.3.16 To determine if a new medication reduces headache pain, some patients are given the new medication and others are given a placebo. Neither the researchers nor the patients know who is taking the real medication and who is taking the placebo. Is this a blind experiment, double blind experiment, or neither? Why?

1.4.2 Suppose a car dealership offers a low interest rate and a longer payoff period to customers or a high interest rate and a shorter payoff period to customers, and most customers choose the low interest rate and longer payoff period, does that mean that most customers want a lower interest rate? Explain.

1.4.8 Suppose a telephone poll is conducted by contacting U.S. citizens via landlines about their view of same sex marriage. Suppose over 50% of those called do not support same sex marriage. Does that mean that you can say over 50% of all people in the U.S. do not support same sex marriage? Explain

1.4.14 An employee survey says, “Employees at this institution are very satisfied with working here. Please rate your satisfaction with the institution.” Discuss how this question could create bias.

2.1.4 In Connecticut households use gas, fuel oil, or electricity as a heating source. Table #2.1.7 shows the percentage of households that use one of these as their principle heating sources ("Electricity usage," 2013), ("Fuel oil usage," 2013), ("Gas usage," 2013). Create a bar chart and pie chart of this data. State any findings you see from the graphs.

Table #2.1.7: Data of Household Heating Sources

Solve the following case: 10

Saurabh Mitra is a fresh graduate from the institute of Mass Communication. He also possess a Masters Degree in Marketing Management from the Mumbai University. It was through campus recruitment that Saurabh was picked up by Doras Pharmaceuticals, a reputed company, having a large market share in many OTC products. Main among these being a fairness cream named Snowhite and an ointment for burns and cuts branded 'Burns" i.e. Stopburns.

The company has an all India presence and plans to soon launch a pain balm -cum-cold rub named D'Cold. D'cold would be in straight competition with 'Vicks Vaporub' and 'Amrutanjan'.

Shri Manoj Singh, the company's marketing manager, dreams to make Dtcold a leading brand. He has contracted Admagic the country's no. 1 advertising agency to handle the account of D'cold.

When Saurabh joined Doras he was included in the Marketing team of D' cold. L o o k i n g at Saurabh' s qualifications, and interests he was given the task of liaison with the advertising agency Admagic. After a series of meetings between Saurabh and the Account Executive of Admagic, in a few of which Mr. Singh was also present, it was decided to position Dicold towards the adult segment of the market since all the three of them believed that the requirements of the adult segment of the pain balm market were different from those of the children. They were also convinced that D'cold had all the ingredients to meet the requirements of the adult segment of the market. .

Accordingly, the first advertising campaign of D'cold was released in July 1999 to the media. The company decided to concentrate on TV and the national press to reach its targetted customers. The TV spots showed D'cold being used on the father of a family who is down with cold and body ache. The focus of the advertising was on the punch line ‘Bado ka cold rub’(A rub for the adults). The timing of launching D'cold was perfect since the rainy season was considered boom period for cold rubs.

The initial results were very encouraging and by the end of the rainy season D'cold had already become a brand to reckon with. After the rainy season Admagic proposed to change the campaign and accordingly a new campaign was prepared. While the TV spots showed a young mother using D'cold on her school going child the earlier punch line was entirely missing.

Saurabh was not very happy from the TV spots as he felt that the new campaign went against the earlier positioning of D'cold. This, he felt, would confuse the buyers and the advantage of the positioning strategy would be lost. Since Mr. Singh was very happy with the new advertisements Saurabh decided to keep silent.

Requirements:

1. Evaluate D'cold's segmentation strategy. (3)
2. Do you agree with Saurabh's opinion on the new advertisements? (3)
3. What would you do if you were in Saurabh's place? (4)

Binney & Smith (B&S) operates a plant in Lindsay, Ontario, to produce crayons. Their Crayola brand is familiar to almost all pre-schoolers and elementary school children in North America. In 1992, the production goals for the Lindsay plant were doubled, to 4 million 16-stick boxes of assorted-color crayons. Little more than a year earlier, the plant produced about a quarter of that volume. Maybe somewhat surprisingly, employees have been very receptive to these much higher production goals. These employees, most of whom have been with the company for at least ten years, indicate that they’re more excited about their jobs and more satisfied with their working lives than ever before. Workers at B&S traditionally knew their own jobs well, and many of these jobs were repetitive and unchallenging. For instance, one job is to run the machine which glues labels to crayon sticks— 172 labels per minute. The label-gluing machine operator was an expert at his job but knew little about the other jobs in the plant. To get the increased production, management redesigned the label gluing machine operator’s job and almost everybody elses. Workers in the Lindsay plant now do their jobs in teams and are encouraged to learn the jobs of everyone else on their team. Team members regularly rotate jobs to increase their skills and reduce boredom. These teams have taken on the responsibility for solving their work problems. And employees in the plant now also have taken charge of tracking production, changing layouts as needed to solve quality problems, and conceiving and implementing cost reduction ideas like recycling waste. Employees receive no financial or material rewards for accepting these new changes. What they do get is increased recognition, the opportunity to learn new tasks, and greater control over their work. The results have been extremely encouraging for both employees and management. Employees have increased job satisfaction and self-esteem. And the plant has more than doubled its profit in the first year of these new changes. Additionally, employees at Lindsay now have greater job security than they had before because the plant has eliminated the 15 to 25 percent cost disadvantage it previously labored under compared to the company’s sister plants in the United States.

Questions

1. B&S’s historical turnover rate has been very low. Why do you think that is? Shouldn’t a plant with boring and repetitive jobs like gluing 172 labels a minute on crayon sticks have high absenteeism and turnover?

2. Explain why, in spite of tremendously high new production goals, B&S employees seem more satisfied with their jobs than ever.

3. What according to you is the role of the employees attitude in shaping his/her behavior towards his/her work?

Note: The questions are from Organizational Behavior perspective. Each question carries 5 marks. Answer should not exceed 600 words.

Katie Smith is a 29 yr. old female, mother of two children, with a history of IV drug use. She lives in a small town in Southeast Alaska. She’s recently travelled to Anchorage for medical care after experiencing extreme exhaustion and flu-like symptoms. Her medical team here has diagnosed her with endocarditis, a kind of infection of the heart, meaning that she will need heart valve replacement surgery. Unfortunately, this would be her second valve replacement in two years, and in addition, she currently tests positive for heroin and trace amounts of opioid pharmaceuticals. Her medical team is furious. Endocarditis is a direct result of her heroin use. After her first valve replacement, her medical warned her that a return to drugs could easily kill her and that they would likely be unwilling to do another valve replacement if her drug use continued. They recommended addiction services in Anchorage to her at the time.

Now, her medical team argues that they will not perform her heart valve replacement surgery. Doing so, they believe, would be providing futile treatment and an unethical use of resources.

In answering the questions below, you may consult an essay from the Seattle Times on this kind of case: “Facing Addicts with Ruined Hearts, Many Doctors Confront Tough Ethical Questions”, from April 2018. This is a shorter version of a longer New York Times article. I will post a link to the article on Blackboard with this test.

1. Given Wicclair’s categories of futility, why do you think Katie’s medical team considers the 2^nd valve replacement futile? Please explain in detail.

2. Do you agree with the medical team that the valve surgery is futile in some sense in her case? Why or why not?

3. What are two other ethical issues from class that could be most helpful in analyzing the ethics of this case? State and explain each issue in detail, and in your answer, be sure to show how the issues you raise apply to Katie’s case specifically. Please use separate paragraphs for each issue.

Instructions: Prepare a classified balance sheet for Baxter Incorporated, at December 31, 2018. The balance sheet should be prepared in good form in excel. Be sure to use proper spacing, references, and formulas.

Baxter Incorporated was started by John Ross early in 2018. Initial capital was acquired by issuing shares of commons stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact discs. Business was so good during the first year of operation that John is considering opening a second store on the other side of town. The funds necessary for expansion will come from a new bank loan. In order to approve the loan, the bank requires financial statements.

John asks for your help in preparing the balance sheet and presents you with the following information for the year ending December 31, 2018:

A: Cash receipts consisted of the following:

From customers: $360,000
From issue of common stock: $100,000

From bank loan: $100,000

B: Cash disbursements were as follows

Purchase of inventory: $300,000

Rent: $15,000
Salaries: $30,000
Utilities $5,000

Insurance: $3,000
Purchase of equipment and furniture $40,000

C:. The bank loan was made on March 31, 2018. A note was signed requiring payment of interest and principal on March 31, 2019. The interest rate is 12%.

D: The equipment and furniture were purchased on January 3, 2018, and have an estimated useful life of 10 years with no anticipation salvage value. Depreciation per year is $4,000

E: Inventories on hand at the end of the year cost $100,000.

F: Amounts owed at December 31, 2018, were as follows:

To suppliers of inventory $20,000

To the utility company 1,000

G: Rent on the store building is $1,000 per month. On December 1, 2018, four months was paid in advance.

H: Net income for the year was $76,000. Assume that the company is not subject to federal, state, or local

income tax.

I: One hundred thousand shares of no common stock are authorized, of which $20,000 shares were issued

and are outstanding.

ProCannons Donuts: An alum of BSU, Donna Smith, knew the donuts baked by ProCannons donuts would sell like wildfire in the city where She was the new CEO of a local supermarket. They had 20 stores spaced out in the City of Farside Ohio, 200 miles away. The stores were on average 10 miles apart from the city center. Donna suggested that it would be easy to get the donuts to her stores; just buy a fleet of the Ram Sprinter vans at $50K each and have them deliver the needed 1000 lbs. of donuts a day each store would need. It would be all highway driving. You wondered if that was that the most economical logistics system to use for the long term. You did some research and found that instead of a fleet of Sprinter vans maybe a day hauler than cost $100K, and can haul 20,000 lbs. could take the donuts to a warehouse space where you could distribute each stores’ shipment to just two sprinters that went from the warehouse and back 10 times each day. Everyone on your logistics team makes $50,000 a year. You use a 250 day working year. The Day hauler truck must be back at the bakery at the end of the day so it cannot deliver to any of the stores there in Farside. Your company uses a 5 year cost payment scheme for rolling stock and 20 years for buildings. The Warehouse you would have to buy with your day hauler scheme would cost $5,000,000, and you would need 4 people to unload and load the trucks. The Per mile costs highway for the Sprinter would be .35 ( for the fleet of Sprinters going to each store) and .45 for in-town from the warehouse; the Day hauler per mile cost is 1.65. No vehicle would be allowed to drive more than 400 miles in a day. What is the total daily cost? Which option is the best economically? What are two different pieces of information that could change, or might be too simplistic in this scenario.

Mahesh graduated from college six years ago with a finance undergraduate degree. Although he is
satisfied with his current job, his goal is to become a banker. He feels that MBA degree would allow
him to achieve this goal. After examining business schools, he has narrowed his choice to Kathmandu
University, school of management, one of the renowned University in Nepal. Although internships are
encouraged by the school, to get class credit for the internship, no salary can be paid. Other than
internship, neither school will allow its students to work while enrolled in its MBA program. Assume
it is now January 1, 2020 and he is planning to accumulate Rs 710,000 including college fees and other
stationery expenses for an MBA in January 2025. Today he is thinking for a deposit in a bank that pays
11 per cent nominal interest rate. The source of income that he received quarterly from his current job
is Rs 65,000. Out of his quarterly income he spends 65 per cent amount for his living. His mother has
also deposited Rs 200,000 in his account to facilitate his MBA degree. In order to attain his goal, you
are required to answer the following: [1+2+2+2+1+2=10]
a. How much must he deposit in lump sum on January 1, 2020 to accumulate a university fees along
with stationery expenses of Rs 710,000 on January 1, 2025?
b. If Mahesh wants to make equal installments on each January 1 from 2021 through 2025, how large
must each payment be?
c. If he wants to invest his quarterly salary net saving in the bank, the first payment being made at the
end of first quarter from now, how much he could accumulate in January 1, 2025? Assuming that
interest is compounded on quarterly basis.
d. What is the effective annual rate if interest is compounded monthly? Explain the difference
between annual percentage rate and effective annual rate.
e. If his bank balance of Rs 200,000 today pays 9 per cent annual interest compounded monthly, to
which value it will grow on January 1, 2025?
f. A dollar in hand today is worth more than a dollar to receive next year. Give your arguments.

In this assignment students will demonstrate their understanding of the distribution of means doing all steps of hypothesis testing.
For each problem students will write out all steps of hypothesis testing including populations, hypotheses, cutoff scores, and all relevant calculations. Assignments will be typed and uploaded in a word document to blackboard.

1.A nationwide survey in 1995 revealed that U.S. grade-school children spend an average of µ = 8.4 hours per week doing homework. The distribution is normal with σ = 3.2. Last year, a sample of n = 100 grade-school children was given the same survey. For this sample, the mean number of homework hours was 7.1. Has there been a significant change in the homework habits of grade-school children? Test with α = .05.

2.On the basis of her newly developed technique, a student believes she can reduce the amount of time schizophrenics spend in an institution. As director of training at a nearby institution, you agree to let her try her method on 20 schizophrenics, randomly sampled from your institution. The mean duration that schizophrenics stay at your institution is 85 weeks, with a standard deviation of 15 weeks. The scores are normally distributed. The results of the experiment show that patients treated by the student stay at the institution a mean duration of 78 weeks. What do you conclude about the student’s technique? Use α = .05.

3.A psychologist has developed a standardized test for measuring the vocabulary skills of 4-year-old children. The scores on the test form a normal distribution with μ = 60 and σ = 10. A researcher would like to use this test to investigate the idea that children who grow up with no siblings develop vocabulary skills at a different rate than children in large families. A sample of n = 25 children is obtained, and the mean test score for this sample is 63. On the basis of this sample, can the researcher conclude that vocabulary skills for children with no siblings are significantly different from those of the general population? Test at the .01 level of significance.

4.The average age for licensed drivers in a county is 42.6, with a standard deviation of 12, and the distribution is approximately normal. A county police officer was interested in whether the average age of those receiving speeding tickets is less that the average age of the population who has a license. She obtained a sample of 16 drivers with speeding tickets. The average age for this sample was 34.4. Do all the steps of hypothesis testing using the 0.01 significance level.