Father, Son and Gum; As other dynasties fade, a fourth-generation CEO shakes up Wrigley by tossing out his dad's rule book.

IN 1995, WILLIAM WRIGLEY JR. approached his father with a bold idea: The family-run company, after dominating the chewing-gum business for a century, should start selling mints. His father, who had successfully run Wm. Wrigley Jr. Co. for more than three decades, turned him down. "We know gum," the son recalls his father saying.

Family dynasties running big public companies over several generations are a vanishing breed. But William Wrigley Jr., who took over the business in 1999 after his father's unexpected death, has managed to turn around a company whose sales had stagnated and whose staff was steeped in doing things in the ultra-conservative manner of his father. At 35 years old, Mr. Wrigley set out to reinvent an iconic company while battling the legacy of his dad, a tough boss who had rejected many of his ideas over the years.

Since then, Mr. Wrigley has transformed the company from a cautious purveyor of Doublemint and Juicy Fruit into one of the fastest-growing publicly traded food companies. For the first time in decades, Wrigley is buying competitors, taking on debt and pouring money into research. After introducing few products in the 1990s, the company launched 72 last year alone, including cappuccino-flavored gum and sour gummy Life Savers. It purchased Altoids mints, is thinking about chocolate and patented chewing gum for dogs. "I don't rule anything out," says Mr. Wrigley.

While some of his ventures have flopped, Wrigley has performed well in the seven years since he took over. Sales have more than doubled, to $4.16 billion last year, profits have increased 68% overall and the company's stock has risen about 45%. Some analysts worry that the company's moves to diversify could shift its focus from the $15 billion world-wide gum market, where Wrigley is the top player.

Mr. Wrigley, now 42, has also hired outsiders for top positions, eased the dress code and encouraged employees to take risks -- things that didn't happen under his father. As long as his father was at the center of the company, "I was going to get stopped from getting any further into the center or we were going to collide like two neutrons or atoms in an accelerator," says Mr. Wrigley. "That is one of the biggest challenges for family businesses," he says. "When to step aside and how to step aside."

Ford Motor Co. and J.M. Smucker Co. are run by the great-grandsons of the founders, but many older family business dynasties are dying out as the third and fourth generations decide not to take over. Children don't feel as close to the founder as time passes, and increasingly independent boards are demanding broader sets of skills for leaders.

The Wrigley family helped build Chicago and remains one of its best- known dynasties. Wrigley's Michigan Avenue headquarters is one of the city's landmark buildings and the family's name is on everything from the Chicago Cubs baseball stadium to the Wrigleyville neighborhood to part of the new Millennium Park.

Yet growing up, Mr. Wrigley tried to conceal his identity, by introducing himself with just his first name. "Introducing yourself as Bill Wrigley was way more of a liability," he says. "Most people would think it's terrific. But people instantly look at you differently, judge you, and say, 'Oh here's this real wealthy person' or something, 'and he's going to be full of himself.' "

Although Mr. Wrigley shut down the company's 94-year-old gum plant on Chicago's south side last year, he simultaneously opened a $45 million research and development center in the city that's helped revitalize the Goose Island area and is bringing in white-collar jobs. Wrigley, which has had gum factories overseas since the 1920s, still makes gum at a facility in Yorkville, Ill.

Through trusts, Mr. Wrigley controls more shares of the company than any other investor, with about 15% under his beneficial ownership. The company won't say how many shares are held by the entire Wrigley clan. A divorced father of three, Mr. Wrigley is the only family member at Wrigley. His older sister and brother have never worked at the company. The family has been intensely private for decades, and Mr. Wrigley grants few interviews.

The first William Wrigley Jr. was 11 years old when, in 1872, he ran away from Philadelphia to New York, where he hawked newspapers and slept on the street, according to a 1920 article in American Magazine. Years later he went to Chicago to peddle soap, then baking powder, to shop owners. To entice them, he gave away two packages of chewing gum with each can of baking powder. When the gum became more popular, he started selling that instead. Soon he was making his own gum. Juicy Fruit hit shelves in 1893. To build sales, Mr. Wrigley twice gathered every phonebook in the country and mailed each person listed four sticks of chewing gum, according to the article, which the company cites. By 1920, he was making nine billion sticks of gum a year and had become the world's largest advertiser of a single product. In 1923, the company went public.

The Great Depression nudged the company in a more cautious direction under the founder's son, Philip Wrigley. (He was the company's only leader who wasn't named William.) When Philip's son, William Wrigley, took over as chief executive in 1961, he increased sales by pushing into Europe and Asia. But Wrigley stood by as Warner-Lambert Co. took the lead in sugarless gum with Trident in the 1960s.

The current William Wrigley Jr. grew up watching his father go to work at the company's white terra cotta headquarters in Chicago. When he was 5, his parents divorced. At 10, he moved to Arizona with his mother and siblings, where he swam competitively. He was a B student in private school. As a teen, he lived with his father during the summers and worked at the company, driving to the office with his father. On weekends, he water-skied with his dad at the Wrigley estate in Lake Geneva, Wis.

One summer, the younger Mr. Wrigley donned a white lab coat to mix test batches of Extra sugarless gum. At Duke University, where he studied economics, he read company memos mailed to him by his father. But he didn't go to work at Wrigley right away. He wanted to create something of his own. "I've always liked the idea of being an entrepreneur," Mr. Wrigley says. He'd grown up intrigued by the adventurous tales he heard about his great-grandfather, the company founder. "Those genes maybe skipped a couple generations and popped up again."

After graduating, he moved to Seattle to help a friend launch a three-person business selling stain remover. His father gave his reluctant blessing, Bill Jr. says. Bill Jr. set himself up in the frozen-foods aisle of supermarkets to demonstrate the stain remover on a carpet sample. Soon, working at Wrigley seemed more exciting. He returned to Chicago in 1985 as his father's assistant.

The elder Wrigley was a formal man whom nearly everyone, even friends, called "Mr. Wrigley." He was called that until he died, even though by the 1990s, many top executives were much more informal. Yet Mr. Wrigley warmed employees by remembering their birthdays and shaking hands with workers at factories, recalls Dushan Petrovich, Wrigley's chief administrative officer.

Fanatical about details, Mr. Wrigley once flew a Chicago designer to meet him at Wrigley's Prague office in order to match the shade of blue in the carpet there with the floors at headquarters. He insisted on screening casting tapes for the new Doublemint twins, to find actors with the right look. "He didn't get challenged a whole lot," Bill Jr. says. "It was sort of 'This is what Mr. Wrigley wants and so let's go find a character with a shorter haircut.' "

When the younger Mr. Wrigley took a top job at Wrigley's Canadian division in 1990, he set out to change the recipes and packaging for Juicy Fruit, Doublemint and Spearmint. Sales in Canada were falling and the formulas had hardly changed in decades. He also proposed launching a pellet-shaped sugarfree gum, which was selling well for Wrigley in Europe.

His father quickly nixed the packaging and recipe changes because he said they could alienate longtime customers, Bill Jr. recalls. The elder Wrigley balked at pellet gum, too, because it required costly new packaging equipment. Bill Jr. pressed, lobbying over lunch in his father's regular booth at the company's private restaurant. His father gave in. Excel pellets eventually became Wrigley's best- selling product in Canada. Bill Jr. doesn't recall his father congratulating him. "That just wasn't his style," he says.

In the mid-1990s, Altoids and other strong-tasting mints began gaining space in the candy aisle. Bill Jr. prodded his father to buy Frisk, a Belgian maker of zippy peppermints. Wrigley already had vast global merchandising and distribution. It could plug in the mints and increase sales, Bill Jr. figured. But his father thought "intense" mints were a fad. Besides, he told his son, there was still room to grow in gum. Italian competitor Perfetti Van Melle bought Frisk instead in 1995.

By the late 1990s, as the elder Mr. Wrigley reached his mid-60s, Bill Jr. began asking about his own future. The elder Mr. Wrigley didn't want to talk about succession. And he rarely commented on whether his son was doing a good job, Bill Jr. says. "I never felt that confidence from him." Frustrated, he began thinking about leaving Wrigley.

Howard Bernick, the departing Alberto-Culver Co. CEO who now sits on Wrigley's board, recalls the elder Mr. Wrigley thinking his son wasn't ready yet to take over and saying, " 'I just wish he was a little bit older.' "

Mr. Wrigley's father "had no doubt that he was going to be the next leader," says Richard Smucker, co-chief executive of jam maker J.M. Smucker and a Wrigley director. He just "leaned over backward a little bit not to express that" so people wouldn't think of his son as "the fair-haired boy." Mr. Smucker knows the issue of family business dynasties well, also being the great-grandson of a company founder. "Any family member has to work harder," he says.

The younger Mr. Wrigley was working in Europe in January 1999 when his father slipped on ice at the family estate in Wisconsin and broke his hip. Since his father was going through a divorce with his third wife at the time, Bill Jr. stepped in to take care of him, helping him run meetings from his home. What seemed a mild injury grew serious as his frail condition magnified other health problems. Nevertheless, the elder Wrigley insisted on running the annual shareholder meeting that March.

His condition took a turn for the worse. Bill Jr. sent the company jet to fetch his dad's doctor, who was away in Arizona. It was the first time anyone had dispatched the plane without his father's permission. "Don't worry," Bill Jr. told his father as he sat on his hospital bed. "I'm going to take care of everything." He says his father told him that he loved him.

By the next morning, the elder Mr. Wrigley had slipped into a coma. Terrified, Bill Jr. led the annual meeting for the first time. Days later, Wrigley's board named him acting president. He went to the hospital to tell his father, who was unresponsive in the coma. Mr. Wrigley died the next day, of complications from pneumonia. "Once he knew that I was going to run the company, I think he said, 'OK, now it's time for me to go,' " Bill Jr. says.

Ten days later, William Wrigley Jr. became the fourth chief executive of the company, following his father, grandfather and great- grandfather. Wall Street immediately questioned whether he had enough experience. Although the company had been largely successful during his father's tenure, when Bill Jr. took over, its U.S. gum sales had been flat for about five years.

Sorting through his father's office, Mr. Wrigley was shocked to find in his in-box a question on what color to make the carpet on the 12th floor. "I don't want to make this decision," Mr. Wrigley recalls thinking. "And I don't want anyone who reports to me to make this decision." He turned his father's office into a conference space.

He started making other changes. Some were little, like lifting the ban on using voice-mail during business hours and loosening the dress code from coats and ties to "business-appropriate" attire.

Other changes were bigger, like creating the company's first-ever strategic plan, and hiring top managers from Gillette Co. and Procter & Gamble Co., breaking a tradition of promoting from within. He also ordered the new packaging and recipes for Doublemint and other standards that his father had rejected.

Sitting in a church before a friend's wedding, Mr. Wrigley scrawled on a card: "Wrigley brands woven into the fabric of everyday life around the world." He says he intentionally left out "gum" so the statement would stay relevant as the company expanded into candy. Today, his scribbling has become the company's vision statement.

Mr. Wrigley says he isn't trying to change Wrigley's values -- or its emphasis on chewing gum, a retail standard in the checkout line. Gum accounts for 90% of Wrigley's sales. "We see great growth in chewing gum," Mr. Wrigley says. "But then it was also just logical to say 'Well, what else is up at the front end there? Who else are we competing with? And why can't we do some of that too?' "

When Mr. Wrigley took over, there was "an unleashing of a lot of energy," says Mr. Petrovich, who also worked for his father. But some employees bristled at the changes in style. Managers fumbled over the new dress code, some not exactly sure what kind of shoes were allowed. A company-described "breakthrough" training session, that emphasized stretching and drinking water, was dismissed by some employees as a new-age fad, executives say. In a meeting shortly after Mr. Wrigley took over, someone mentioned a new initiative he knew nothing about. The people "looked at me like I was on the moon," he recalls, "because in the past, anything that happened, the CEO knew about."

He sent workers an email that said, "If we never make mistakes, then we are most likely not being very innovative and not taking enough risks." He made his own mistakes. He thought gum could be a vehicle for medicine, so Wrigley invested more than $10 million to start a health-care division that launched Surpass, a chewing gum infused with antacid. Wrigley couldn't persuade stores to stock it at the checkout counter, and finally pulled it off the market in 2003.

What might have been his biggest gamble never materialized. In 2002, he says he got a message to call Richard Lenny, Hershey's CEO. Mr. Lenny said the trust that controls Hershey wanted to sell the candy maker. Would Wrigley consider a bid? Wrigley hadn't bought a company in half a century and didn't even carry debt on its balance sheet at the time. "Absolutely," Mr. Wrigley said.

Board members weren't so sure about a deal that huge. Mr. Bernick says he thought Mr. Wrigley should "hit singles" instead of swinging for homers. His father "wouldn't have done that deal," Mr. Smucker says. Mr. Wrigley eventually convinced the board, and Wrigley beat Nestle SA and Cadbury Schweppes PLC with its $12.5 billion bid. But the Hershey trust got cold feet amid community and political pressure and called off the sale at the last minute.

Getting so close to a big deal made Mr. Wrigley more determined to move into candy. He told workers to internally start calling the company the Wrigley Confectionery Co. In 2004, Wrigley expanded into lollipops and chewy candy by buying assets from the Joyco arm of Agrolimen, a Spanish food conglomerate. Later that year, Wrigley paid $1.48 billion for Altoids, Life Savers and other candy brands from Kraft Foods.

Wrigley is looking at more acquisitions and, at its new research center, scientists are searching for the next big candy. New products now account for 17% of sales, up from less than 6% during the late 1990s. Executives won't be specific about what is in the works, but "chocolate is within our playing field," says Surinder Kumar, Wrigley's chief innovation officer.

Some analysts say Wrigley may have overpaid for Kraft's brands and that weak sales of Altoids aren't a good sign. Mr. Wrigley says sales are within expectations. And some of Wrigley's new products haven't panned out. In addition to closing its health-care division, the company has pulled back on breath-freshening strips amid strong competition from Pfizer Inc.'s Listerine brand.

In his office, Mr. Wrigley keeps a picture of his father huddled with his dogs. In some ways, he says, it was better that his father wasn't there when he took over the company. "Maybe the silver lining in the whole thing is that maybe he realized it would have been difficult to coexist with different styles in the business," Mr. Wrigley says. His father's passing "was a graceful exit, although, to put it mildly, hugely unfortunate to lose your father at 66," he says.

He wishes his father were alive to see how he's made Wrigley grow. "My only regret is that I don't have my father side by side, or even off relaxing or retiring on some island, to be able to share it with."

While Mr. Wrigley says he never felt overt pressure from his dad to take over the business, "you kind of know there's a legacy there. You know your family's been in this business since 1891, and there's been a sequence of generations running the company." Mr. Wrigley says he "tried to push that into the background and leave options open to me in terms of what I might be interested in doing . . . .And at the end of the day, the reason I did come back to the business is because it was just darn interesting."

He isn't insisting that his children follow his career path. "You get so much influence from your parents," he says. "The important thing is for us to kind of get out of the way and make sure that we don't try and force them into doing something we wanted to do."

Questions:

1) What changes did he make after assuming leadership?

2) What were the challenges he faced as the new leader?

Alpha=0.05
Exhibit 5

According to Exhibit 5 Find the Test statistic (Current- New).

If you can, use up to 2 decimals in your intermediate calculations.

Use 2 decimals in your final answer

Although older Americans are most afraid of crime, it is young people who are more likely to be the actual victims of crime. It seems that older people are more cautious about the people with whom they associate. A national survey showed that 10% of all people ages 16-19 have been victims of crime.† At a high school, a random sample of

n = 65 students

(ages 16-19) showed that

r = 11

had been victims of a crime. Note: For degrees of freedom d.f. not in the Student's t table, use the closest d.f. that is smaller. In some situations, this choice of d.f. may increase the P-value a small amount and thereby produce a slightly more "conservative" answer.

(a) Do these data indicate that the population proportion of students in this school (ages 16-19) who have been victims of a crime is different (either way) from the national rate for this age group? Use

α = 0.05.

Do you think the conditions

np > 5

and

nq > 5

are satisfied in this setting? Why is this important?(i) What is the level of significance?


State the null and alternate hypotheses.

H₀: p = 0.10; H₁: p < 0.10H₀: p = 0.10; H₁: p > 0.10    H₀: p = 0.10; H₁: p ≠ 0.10H₀: μ = 0.10; H₁: μ ≠ 0.10H₀: μ = 0.10; H₁: μ < 0.10H₀: μ = 0.10; H₁: μ > 0.10

(ii) What sampling distribution will you use? What assumptions are you making?

The standard normal, since np < 5 and nq < 5.The standard normal, since np > 5 and nq > 5.    The Student's t, since np > 5 and nq > 5.The Student's t, since np < 5 and nq < 5.

What is the value of the sample test statistic? (Round your answer to two decimal places.)


(iii) Find (or estimate) the P-value.

P-value > 0.5000.250 < P-value < 0.500    0.100 < P-value < 0.2500.050 < P-value < 0.1000.010 < P-value < 0.050P-value < 0.010

Sketch the sampling distribution and show the area corresponding to the P-value.

(iv) Based on your answers in parts (i) to (iii), will you reject or fail to reject the null hypothesis? Are the data statistically significant at level α?

At the α = 0.05 level, we reject the null hypothesis and conclude the data are statistically significant.At the α = 0.05 level, we reject the null hypothesis and conclude the data are not statistically significant.    At the α = 0.05 level, we fail to reject the null hypothesis and conclude the data are statistically significant.At the α = 0.05 level, we fail to reject the null hypothesis and conclude the data are not statistically significant.

(v) Interpret your conclusion in the context of the application.

There is sufficient evidence at the 0.05 level to conclude that there is a difference from the national average for the population proportion of crime victims.There is insufficient evidence at the 0.05 level to conclude that there is a difference from the national average for the population proportion of crime victims.    

(b) Find a 90% confidence interval for the proportion of students in this school (ages 16-19) who have been victims of a crime. (Round your answer to three decimal places.)

(c) How large a sample size should be used to be 95% sure that the sample proportion p̂ is within a margin of error

E = 0.04

of the population proportion of all students in this school (ages 16-19) who have been victims of a crime? Hint: Use sample data p̂ as a preliminary estimate for p. (Round your answer up to the nearest student.)
students

Although older Americans are most afraid of crime, it is young people who are more likely to be the actual victims of crime. It seems that older people are more cautious about the people with whom they associate. A national survey showed that 10% of all people ages 16-19 have been victims of crime.† At a high school, a random sample of

n = 66 students

(ages 16-19) showed that

r = 10

had been victims of a crime. Note: For degrees of freedom d.f. not in the Student's t table, use the closest d.f. that is smaller. In some situations, this choice of d.f. may increase the P-value a small amount and thereby produce a slightly more "conservative" answer.

Do you think the conditions

np > 5

and

nq > 5

are satisfied in this setting? Why is this important?

(i) What is the level of significance?

State the null and alternate hypotheses.

H₀: μ = 0.10; H₁: μ ≠ 0.10H₀: p = 0.10; H₁: p < 0.10    H₀: μ = 0.10; H₁: μ > 0.10H₀: p = 0.10; H₁: p > 0.10H₀: μ = 0.10; H₁: μ < 0.10H₀: p = 0.10; H₁: p ≠ 0.10

(ii) What sampling distribution will you use? What assumptions are you making?

The standard normal, since np < 5 and nq < 5.The Student's t, since np > 5 and nq > 5.    The standard normal, since np > 5 and nq > 5.The Student's t, since np < 5 and nq < 5.

What is the value of the sample test statistic? (Round your answer to two decimal places.)

(iii) Find (or estimate) the P-value.

P-value > 0.5000.250 < P-value < 0.500    0.100 < P-value < 0.2500.050 < P-value < 0.1000.010 < P-value < 0.050P-value < 0.010

Sketch the sampling distribution and show the area corresponding to the P-value.

(iv) Based on your answers in parts (i) to (iii), will you reject or fail to reject the null hypothesis? Are the data statistically significant at level α?

At the α = 0.05 level, we reject the null hypothesis and conclude the data are statistically significant.At the α = 0.05 level, we reject the null hypothesis and conclude the data are not statistically significant.    At the α = 0.05 level, we fail to reject the null hypothesis and conclude the data are statistically significant.At the α = 0.05 level, we fail to reject the null hypothesis and conclude the data are not statistically significant.

(v) Interpret your conclusion in the context of the application.

There is sufficient evidence at the 0.05 level to conclude that there is a difference from the national average for the population proportion of crime victims.There is insufficient evidence at the 0.05 level to conclude that there is a difference from the national average for the population proportion of crime victims.    

(b) Find a 90% confidence interval for the proportion of students in this school (ages 16-19) who have been victims of a crime. (Round your answer to three decimal places.)
lower limit    upper limit    
(c) How large a sample size should be used to be 95% sure that the sample proportion p̂ is within a margin of error

E = 0.05

of the population proportion of all students in this school (ages 16-19) who have been victims of a crime? Hint: Use sample data p̂ as a preliminary estimate for p. (Round your answer up to the nearest student.)
students

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $65,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $110,000 per year, with a $20,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $85,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. Ben thinks that he will receive an offer of $92,000 per year upon graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.3 percent.

3. Assuming all salaries are paid at the end of each year, what is the best option for Ben— from a strictly financial standpoint?

4. Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

5. What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?

6. Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision?

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve his goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $65,000 per year, and his salary expected to increase at 3% per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26%. Ben has savings account with enough money to cover the entire cost of his MBA program.

The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $110,000 per year, with a $20,000 signing bonus. The salary at this job will increase at 4% per year. Because of the higher salary, his average income tax rate will increase to 31%. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago.

The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one year program, with a tuition cost of $85,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. Ben thinks that he will receive an offer of $92,000 per year upon the graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5% per year. His average tax rate at this level of income will be 29%. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 4.7%

Questions:

1.How does Ben's age affect his decision to get an MBA?

2.What other, perhaps nonquantifiable, factors affect Ben's decision to get an MBA?

3.Assuming all salaries are paid at the end of each year, what is the best option for Ben from a strictly financial standpoint?

4.Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

5.What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?

6.Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision

David Jetter graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve his goal. After examining schools, he has narrowed his choice to either Prentice University or Mount Alliance College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

David currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $50,000 per year, and his salary expected to increase at 3 % per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 %. David has savings account with enough money to cover the entire cost of his MBA program.

The Ritt College of Business at Prentice University is one of the top MBA programs in the country. The MBA degree requires two years of full time enrollment at the university. The annual tuition is $65,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3000 per year. David expects that after graduation from Prentice, he will receive a job offer for about $110,000 per year, with a $20,000 signing bonus. The salary at this job will increase at 4 % per year. Because of the higher salary, his average income tax rate will increase to 31 %.

The Bradel School of Business at Mount Alliance College began its MBA program 16 years ago. The Bradel School is smaller and less well known than the Ritt College. Bradel offers an accelerated, one – year program, with a tuition cost of $80,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. David thinks that he will receive an offer of $92,000 per year upon the graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5 % per year. His average tax rate at this level of income will be 29 %.

Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. David also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.5 percent.

1. How does David’s age affect his decision to get an MBA? Explain why?

2. What other, perhaps non- quantifiable factors affect David’s decision to get an MBA? Explain in detail

3. Assuming all salaries are paid at the end of each year, what is the best option for David – from a strictly financial standpoint? Explain why in detail with calculations.

4. David believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement? So what is the future value of each option?

5. What initial salary would David need to receive to make him indifferent between attending Prentice University and staying in his current position?
Explain in detail with calculations.

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $65,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $110,000 per year, with a $20,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated, one-year program, with a tuition cost of $85,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. Ben thinks that he will receive an offer of $92,000 per year upon graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben also estimates that room and board expenses will cost $2,000 more per year at both schools than his current expenses, payable at the beginning of each year. The appropriate discount rate is 6.3 percent.

1. How does Ben’s age affect his decision to get an MBA?

2. What other, perhaps nonquantifiable factors affect Ben’s decision to get an MBA?

3. Assuming all salaries are paid at the end of each year, what is the best option for Ben—from a strictly financial standpoint?

4. Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

5. What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?

6. Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision?

Davis Uniform Corporation operates a store that sells uniforms. The following are the transactions that occurred during the first quarter of operation- Jan. 1 to Mar. 31, 2019.

Jan.     1   Davis issues 20,000 shares of $1 par value common stock with an issuing price of $10

per share.

Jan.     2   Purchased furniture and fixtures from Acme Furniture for $14,400 cash.

Jan.     4   Purchased $1,600 of office supplies for cash.

Jan.   15   Paid $36,000 in advance for one year’s rent on the store building. The rent begins with

                Jan 15. The company counts January for half a month.

Jan.   31   Paid salaries to employees for the first month, $3,600.

Feb.    1    Purchased $62,400 of uniforms inventory on account from the Birdwell Uniforms

                 Manufacturing Company.

Feb.    1    Borrowed $66,000 from a local bank and signed two notes. The first note of                  

                $21,000 requires payment of principal in six months with annual interest rate at 4%.

                The second note of $45,000 requires the payment of principal in two years and annual

interest payment with annual interest rate at 5%.

Feb.    6    Sold uniforms on account to St. Jude’s School for $7,200. Cost of the uniforms sold

is $4,800.

Feb.    9   Paid Birdwell Uniforms Manufacturing Company $50,000 for the purchase on Feb. 1.

Feb. 20    Sold uniforms to a chemical factory for $79,200 cash. Cost of the uniforms sold is

                 $47,520.

Feb. 23    Purchased $10,000 of uniforms inventory on account from the Birdwell Uniforms

                 Manufacturing Company.

Feb. 28    Paid salaries to employees for the month of February, $4,200.

Mar.   1   Sold uniforms to the football team of Robert Lee High School, and accepted a $12,000,

three-month, note receivablewith annual interest rate at 5%. Cost of the uniforms

sold is $9,600.

Mar.   1   Subleased a portion of the building to a jewelry store. Received $3,000 in advance

for three months’ rent beginning on Mar. 1.

Mar.   3   Some uniforms were returned by the chemical factory which made a purchase on

                Feb. 20. The selling price and cost of the returned uniforms is $7,200 and 4,320,

respectively. Cash of $7,200 is refunded to the customer.

Mar. 23   Paid Birdwell Uniforms Manufacturing Company $14,400 for the purchases in Feb.

Mar. 25   Received $5,800 cash from St. Jude’s School.

Mar. 30   The corporation announced and paid its shareholders cash dividends of $2,500.

Requirements:

1. Analyze the transactions and record journal entries in General Journal.

2. Open accounts in General Ledger and post from the General Journal to the general ledger accounts.

3. Record adjusting entries in General Journal and post to the general ledger accounts.

Additional information:

1. At the end of March, $900 of supplies remained.

2. The furniture and fixtures have a useful life of six years and will be worthless at the end of their useful life.

3.    Salaries for the month of March are $4,600, and will be paid in April.

4.    The company’s management estimated that of the $1,400 remaining on account from St.

Jude’s School, $200 would be uncollectible.

5. Income tax rate applied to the company is 21%.

4. Prepare a worksheet as of Mar 31, 2019.

5. For Davis Uniform Corporation as of Mar 31, 2019, prepare the financial statements

including Income Statement (multiple-step with EPS section), Classified Balance Sheet,

and Statement of Stockholders’ Equity. Statement of Cash Flows is not required.

6. Prepare closing entries to close the temporary accounts and post to the general ledger accounts.

Before reading Detroit's Forgotten History by Bill McGraw, I had no idea that slavery occurred anywhere in Michigan, especially in Detroit. From middle school to high school, I learned a good amount of knowledge on slavery, but I was led to believe that slavery only occurred in Southern states. And for the southern states still having slavery this resulted in the Civil War. Thinking about it now, my best knowledge of slavery are the events that occurred because of it, instead of slavery itself. For example, the Underground Railroad was taught heavily in school, while the direct subject of slavery wasn't. This is very surprising since the magnitude slavery has on United States's history. Education system neglected teaching the harsh, violent riots of slavery but focused more on uprising events like the Underground railroad. Now events like the Underground railroad deserve recognition, but at the same time we shouldn't shy away from the harsh, violent acts these innocent people endured. Living near Detroit my whole life, and not knowing that slavery played a huge role in the foundation of Detroit is very disappointing. I entirely agree with McGraw's statement that: "Local students learn about the Underground Railroad in school, but Detroit’s slave history is rarely taught.”? In the , Underground Railroad and Violence by Roy E. Finkenbine, Finkenbine addresses the violence that occurred against free black people after the Civil War. Violence was used against African Americans to make them leave or even die. Free blacks from the south and north made their way to the east side of Detroit to live in the neighborhoods. This obviously provoking the fellow neighbors in these neighborhoods, violence then would break out. These acts of violence were meant to push the free slaves away but instead it did the opposite. These free slaves were so desperate and determined to stay free that they were willing to return the violence back. Members of the African American community and some white allies fought back to protect the free slaves wanting to stay free (Finkenbine pg. 23). The law that played a significant role in the uprisings and violence described by Finkenbine was the Fugitive Slave Act of 1793. Violence erupted during this act because slave owners were able to track any of their runaway slaves in the United States. This act did nothing but create more violence because these free slaves were tired of the hardship, so they were going to fight back to live a free life. “Slavery is the ground zero of race relations.” This is an extremely heavy and true statement. After the black community were free by slavery, they were still not accepted in America. With Jim Crow laws and other acts against the black community, the fight was still not over. African Americans had to face the fact that slavery was just the first battle. More racial situations and acts were coming toward them and even this day we see it. Still today racial altercations occur frequently in America and it is just saddening. Noticing the lack of progress this country has made toward this dilemma is truly depressing. As a nation we still can't look or treat people the same, and having to go back to racial objections is horrifying. Taking more action and to keep fighting this oppression is the best way to move forward. Slavery will never be forgotten as a historical period, but not improving from it could be even worse and unforgettable as history goes on.

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