Upon entering the executive conference room in early 2021, Amanda Spangler had to pinch herself to be sure that she was really in an executive meeting at headquarters. After completing an MBA degree, Spangler had landed her dream job as a lead manager at one of the premier brands in the American food industry, Bob’s Baloney (Bob’s).

Spangler’s first months on the job had been all that she had hoped. She had wrestled with important business decisions, experienced the genius of some favorite foody legends, witnessed the drama of marketing a true premium brand, and even hobnobbed with several celebrities. It had been truly amazing. But her biggest surprise was what was going on right then in the conference room. It was clear that things were not well at Bob’s.

The Company

Since its founding in Philadelphia in the 1920s, Bob’s had grown to dominate the world market for ultrapremium bologna. Bob’s market share of the high-end market was greater than 50%, and was particularly strong among high-end restaurants where it was the de facto bologna brand used by elite chefs. World- renowned French chef Bruno Saucisson had recently waxed poetic in his expressions of esteem for the Bob’s product.

The esteem Bob’s drew was not isolated to its customers. It also had a long history of community awards, including being a perennial winner in polls for best meat-processing employer. The company was also well known as a strong corporate advocate for animal rights, which still did not discourage suppliers from competing aggressively to do business with Bob’s. Its merchandise (e.g., t-shirts) was popular among young people because Bob’s was known as a company that cared deeply about its community.

Bob Klobase had launched the company in the mid-1920s after his family had immigrated to the United States from Slovenia. Klobase had a long family heritage in the bologna industry, so it was a natural business for him to build—but Klobase had outdone his family heritage. From the beginning, he had created bologna at the very highest level. Those in meat production circles often observed that to Klobase, “Holy Baloney” was not just an interjection but an abiding product aspiration.

The current management team continued to maintain the same commitment to quality. Company buyers were uncompromising in their demands from suppliers for quality source ingredients, including the spice blends and cures, the nonmeat fillers, and particularly the nuggets of free-range, humanely vivisected, organic beef. Inventory levels were managed carefully to ensure freshness while maintaining sufficient product to quickly meet customer needs. Despite the demanding nature of Bob’s premium customer clientele, it was very rare for the company to receive negative customer feedback. In fact, customer delight had seemingly been uncontained since the company’s 2018 investment in a completely redesigned production facility. The new facility housed a host of cutting-edge food production achievements that permeated the entire production process, including grinding, smoking, slicing, and packaging.

Finally, the Bob’s brand was supported by a creative marketing team. The team was highly regarded for its well-executed advertising campaigns. If anything, brand-building investments at Bob’s were on the rise.

The Meeting

Given that Bob’s was a poster child for corporate success, Spangler was astonished at the negative tone of the meeting. Bob’s CEO Prateek Gupta, sweat accumulating on his forehead, had gotten straight to the point. Diaz, the Argentine food conglomerate and owner of 30% of the equity shares in Bob’s, had recently made public its great displeasure with the current management team. Veronica Mino, the chair of Diaz, had openly decried Bob’s management:

[Sure, everyone says that the team at Bob’s has built a fantastic company, but for the love of chorizo, doesn’t financial performance matter anymore? Shouldn’t a powerhouse brand make money? If the team can’t generate a decent return, they’re as good as dead bologna.]

Bob’s Baloney Case Questions

1.       Why do you believe that the management team at Diaz is so displeased with management performance at Bob’s?

2. What should Spangler say to the committee?

Case Study #1                          WALITAN CONSTRUCTION COMPANY

Ashley Wesley is the assistant controller at the Walitin Construction Company. Walitin is headquartered in Miami, Florida, and has a general contractor’s license in 30 differ­ent states. It is a privately held company with about 5,000 stockholders, with the majority of the stock being owned by the Walitin family.

Roberta Walitin has been the CEO of Walitin Construction for the previous 12 years. Everyone considers her an excellent leader with excellent business skills. She has an undergraduate degree from the University of Illinois in engineering and an MBA from the same school with a concentration in accounting.

Roberta has always insisted on ethical business practices, so two years ago she worked
with Ashley to set up an ethics hotline, which Ashley personally manages on a daily
basis. Anyone either inside or outside of the company can submit tips anonymously by e-mail, telephone, or a special Web page she had set up. There is a prominent link to the hotline on the home page of the company’s Web site.

Since Ashley set up the hotline, she has received three tips, all via the Web. In every case, the tip was about a subcontractor overbilling the company for services ren­dered. In two of the cases, she was unable to confirm or disconfirm whether there was fraud, mainly because it is almost impossible to investigate the work of a sub­contractor on a job that has already been completed. But in the other case, she caught a roofer billing for fictitious work. She did not report the fraud to authorities, but Roberta did immediately replace the subcontractor with another roofing company. Ashley reports to Bob Benson, Walitin’s controller. He’s been with the company for many years and works very closely with Roberta. His main interest seems to be producing the financial statements and working with her to obtain new clients. Roberta and Bob spend large periods of their time going to lunches with clients, participating in civic meetings, and helping in small community-service construc­tion projects.

Because Bob is busy so much of the time with outside activities, Ashley pretty much runs everything in accounting on her own except for the software and hardware, which Bob manages in conjunction with the head of the IT department.

Bob is not interested in details, and anytime Ashley tries to explain something to him, he simply waves a hand and says, “Don’t worry me with operational issues. Just take care of it.” Ashley has learned to live with his hands-off approach.

Overall, Ashley runs everything smoothly. Her main problem is that Betty Grabber, the senior accountant reporting to her, wants Ashley’s job. To make things worse, Betty is a niece of Roberta Walitin’s husband.

Betty is a very wily person. Her goal is to have Ashley fired, and she’s been using her family connections to get the message to Roberta that Ashley is scheming to have Bob Benson, the controller, fired. Ashley also suspects that Betty has been spreading a rumor that she’s planning to go to work for a competitor if she is not successful in tak­ing over Bob’s job.

Ashley is unsure as to whether Bob is aware of the rumors. He seems to be avoiding her recently, and there seems to an edge in his usually friendly voice. Ashley is feeling depressed just thinking about it. She’s heard that Bob is having serious marital prob­lems. Perhaps those problems are affecting the way he acts.

This morning Ashley had a major surprise when she started reading her e-mail, which contained a new anonymous tip. Someone had submitted it last night via the Web, and it had automatically been forwarded to her via e-mail. The tip read as follows:

To: Walitin Tip System

From: http://[email protected]

Sent: Tuesday 8/1/2015

Ms. Wesley,                                                                

I’m sending this tip to help you. I understand what you are going through. You’re working for a liar and a thief. Bob Benson is hacking the accounting system to produce fraudulent financial statements. He’s doing it in such a way that you’ll get the blame. It’s going to be a big mess.

What should Ashley do? Should she try to investigate? Should she report the tip to Roberta?

Evaluate Walitin’s hotline and make recommendations for its improvement.

As an investor today, what would you buy stocks or bonds? Why? (choose only one, please, and use in your answer the difference between the two).

As a CEO of a corporation what would you recommend to the Board of Directors as a source of financing, stocks or bonds? Why?

Assume the CEO has appointed you to spearhead the ED IS strategic planning effort. What are the first steps you will take? Outline a general plan of action for the next three months. Indicate, by title, whom you would involve in the process. Explain your choices.

Should TRU have considered the bid offered by Issac Larian of MGA Entertainment? If TRU's CEO, Dave Brandon, is able to save TRU, where should his turnaround efforts be focused? What financial ratio(s) should he have improved and why?

Create a professional memo to the hospital CEO. In your memo, explain current trends and future challenges of health information exchanges. Include benefits and challenges to joining a HIE. Your memo should include at least one current trend and at least one future challenge

1. What is a stock option? Why are stock options costly for companies? 2. Why did CEO pay increased dramatically in the 1990s? 3. What do you think about the Standard Setting Process of the Accounting Rules

100 words each question

1.​Colgate-Palmolive Company has just paid an annual dividend of $ 1.13. Analysts are predicting dividends to grow by $ 0.16 per year over the next five years. After​ then, Colgate's earnings are expected to grow 6.3 % per​ year, and its dividend payout rate will remain constant. If​ Colgate's equity cost of capital is 7.9 % per​ year, what price does the​ dividend-discount model predict Colgate stock should sell for​ today?

The price per share is ​$ ( ) (Round to four decimal​ places.)

2.IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development​ strategy, in late 2013 you initiate discussions with​ IDX's founder about the possibility of acquiring the business at the end of 2013. Estimate the value of IDX per share using a discounted FCF approach and the following​ data:

bullet ​Debt: $ 22 million

bullet Excess​ cash: $ 116 million

bullet Shares​ outstanding: 50 million

bullet Expected FCF in​ 2014: $ 46 million

bullet Expected FCF in​ 2015: $ 59 million

bullet Future FCF growth rate beyond​ 2015: 6 %

bullet ​Weighted-average cost of​ capital: 9.4 %

The enterprise value in 2013 is ​$ ( )million. ​ (Round to the nearest​ integer.)

The equity value is ​$ ( ) million. ​ (Round to the nearest​ integer.)

The value of IDX per share is ​$ ( ). ​ (Round to the nearest​ cent.)

ABC Corporation is condsidering an IPO. ABC has 12 million shares of common stock owned by its founder and early investors. ABC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, ABC's intrinsic value of operations is $210 million. ABC wants to raise $30 million (net of flotation costs) in net proceeds. The investment bank charges a 7% underwriting spread. All other costs associated with the IPO are small enough to be neglected in this analysis and all shares sold in the IPO will be newly issued shares. Answer the following questions.

1. Based on number of new shares sold in the IPO and the total amount paid by the new shareholders, what is the offer price?

- Offer price = POffer =

2. Based on total value of the company after the IPO and the total number of outstanding shares after the IPO, what is the intrinsic price per share after the IPO?

   - Price per share after the IPO = PPost-IPO =

3. Compare the pre-IPO price, the offer price, and the post-IPO price. Explain why they are similar of different. (No calculations are required.)