The MBA program was experiencing problems scheduling its courses. The demand for the program’s optional courses and majors was quite variable from one year to the next. In one year, students seem to want marketing courses; in other years, accounting or finance are the rage. In desperation, the dean of the business school turned to a Statistics professor for assistance. The Statistics professor believed that the problem may be the variability in the academic background of the students and that the undergraduate degree affects the choice of major. As a start, he took a random sample of last year’s MBA students and recorded the undergraduate degree and the major selected in the graduate program. The undergraduate degrees were BA (=1), BEng (=2), BBA (=3), and several others (=4). There are three possible majors for the MBA students: Accounting (=1), Finance (=2), and Marketing (=3). Can the Statistics professor conclude that the undergraduate degree affects the choice of major?

1. a) Create a cross-classified (or contingency) table with undergraduate degree as the row and MBA major as the column. The data in this table should be deemed as observed counts.

2. b) Create another table with the corresponding expected counts and having row totals, column totals, and grand total. Round each cell value to two decimal places.

3. c) Perform a chi-square test to assess the association (or independence) between undergraduate degree and choice of MBA major at 5% level of significance. Verify the assumptions required for the chi-square test of independence. Make sure you follow all the steps for hypothesis testing indicated in the Instructions section and show your computations.

Elaborate the Agency Theory on the movie "the founder" identify and elaborate on the issues in the movie

THE MBA DECISION

Ben Bates graduated from college six years ago with a finance undergraduate degree. Since graduation, he has been employed in the finance department at East Coast Yachts. 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 schools 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 sup- plies for the program are expected to cost $4,500. Ben thinks that after graduation from Mount Perry, he will receive an offer of $92,000 per year , with a $18,000 signing bonus The salary at this job will increase at 3.5 percent per year. His average income 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 non-quantifiable 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 that 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 to get an MBA?

THE MBA DECISION

Ben Bates graduated from college six years ago with a finance undergraduate degree. Since graduation, he has been employed in the finance department at East Coast Yachts. 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’s annual salary at East Coast Yachts is $57,000 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.

page 129The 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 $63,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,500 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $105,000 per year, with an $18,000 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 $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $3,500. Ben thinks that after graduation from Mount Perry, he will receive an offer of $88,000 per year, with a $15,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average income 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 6.1 percent. Assume all salaries are paid at the end of each year.

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. In choosing between the two schools, Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

5. Suppose that 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 to get an MBA?

Suppose the following data were collected relating CEO salary to years of experience and gender. Use statistical software to find the regression equation. Is there enough evidence to support the claim that on average male CEOs have higher salaries than female CEOs at the 0.010.01 level of significance? If yes, type the regression equation in the spaces provided with answers rounded to two decimal places. Else, select "There is not enough evidence."

Copy Data

1. If a U.S. company establishes a fully owned subsidiary in a foreign country, what aspects of U.S. tax law should the company address?
2. Discuss the implications of applying U.S. employment discrimination law extrateritorially.
3. What role, if any, can a U.S. state play in regulating international trade?

Suppose that you are part of the Management team at Porsche. Suppose that it is the end of December 2019 and

You (as part of the management team) are reviewing Porsche’s hedging strategy for the cash flows it expects to obtain from vehicle sales in North America during the calendar year 2020. Assume that Porsche’s management entertains three scenarios:

Scenario 1 (Expected): The expected volume of North American sales in 2020 is 35,000 vehicles. Scenario 2 (Pandemic): The low-sales scenario is 50% lower than the expected sales volume. Scenario 3 (High Growth): The high-sales scenario is 20% higher than the expected sales volume.

Assume, in each scenario, that the average sales price per vehicle is $85,000 and that all sales are realised at the end of December 2020. All variable costs incurred by producing an additional vehicle to be sold in North America in 2020 are billed in euros (€) and amount to €55,000 per vehicle. Shipping an additional vehicle to be sold in North America in 2020 are billed in € and amount to €3,000 per vehicle.

The current spot exchange rate is (bid-ask) $1.11/€ - $1.12/€ and forward bid-ask is $1.18/€ - $1.185/€. The option premium is €0.025, and option strike price is €0.922. Your finance team made the following forecasts about the exchange rates at the end of December 2020:

• bid-ask will be $1.45/€ - $1.465/€ if the investors (and speculators) consider the euro (€) a safe haven currency during the pandemic.

• bid-ask will be $0.88/€-$0.90/€ if the investors (and speculators) consider the U.S. dollar ($) a safe haven currency during the pandemic

1. You decided not to hedge Porsche’s currency exposure. If the expected final sales volume is 35,000, what are your total revenues
   a) if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€? Let’s call this the baseline scenario.

   b) if the investors consider the euro a safe haven currency during the pandemic? How does this compare to the baseline case?
   c) if the investors consider the U.S. dollar a safe haven currency during the pandemic? How does this compare to the baseline case?

2. Assume that you and the Porsche’s management team decided to hedge using forward contracts. Assume that the expected final sales volume is 35,000. What are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)
   a) if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€?

   b) if the investors consider the U.S. dollar a safe haven currency during the pandemic?

3. As the CFO, you decided to hedge using option contracts. Assuming expected final sales volume is 35,000, what are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)
a) if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€?

b) if the investors consider the U.S. dollar a safe haven currency during the pandemic?

4. Assume that the Scenario 2 (Pandemic) took place in 2020 and the euro became a safe haven currency during the pandemic. What are your cash flows if you did not hedge, hedged using forward contracts, and hedged using option contracts?

5. Assume that the Scenario 2 (Pandemic) took place in 2020 and the U.S. dollar became a safe haven currency during the pandemic. What are your cash flows if you did not hedge, hedged using forward contracts, and hedged using option contracts?

6. Based on the calculations in Part B, do you believe that it is a good policy to hedge Porsche’s currency exposure? Why?

Suppose that you are part of the Management team at Porsche. Suppose that it is the end of December 2019 and a novel coronavirus that causes a respiratory illness was identified in wuhan city, China.

You (as part of the management team) are reviewing Porsche’s hedging strategy for the cash flows it expects to obtain from vehicle sales in North America during the calendar year 2020. Assume that Porsche’s management entertains three scenarios:

Scenario 1 (Expected): The expected volume of North American sales in 2020 is 35,000 vehicles. Scenario 2 (Pandemic): The low-sales scenario is 50% lower than the expected sales volume. Scenario 3 (High Growth): The high-sales scenario is 20% higher than the expected sales volume.

Assume, in each scenario, that the average sales price per vehicle is $85,000 and that all sales are realised at the end of December 2020. All variable costs incurred by producing an additional vehicle to be sold in North America in 2020 are billed in euros (€) and amount to €55,000 per vehicle. Shipping an additional vehicle to be sold in North America in 2020 are billed in € and amount to €3,000 per vehicle.

The current spot exchange rate is (bid-ask) $1.11/€ - $1.12/€ and forward bid-ask is $1.18/€ - $1.185/€. The option premium is 2.5% of US$ strike price, and option strike price is $1.085/€. Your finance team made the following forecasts about the exchange rates at the end of December 2020:

• bid-ask will be $1.45/€ - $1.465/€ if the investors (and speculators) consider the euro (€) a safe haven currency during the pandemic.

• bid-ask will be $0.88/€-$0.90/€ if the investors (and speculators) consider the U.S. dollar ($) a safe haven currency during the pandemic

1. You decided not to hedge Porsche’s currency exposure. Assuming that the expected final sales volume is 35,000, what are your total costs
   a) if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€? Let’s call this the baseline scenario.

   b) if the investors consider the euro a safe haven currency during the pandemic? How does this compare to the baseline case?
   c) if the investors consider the U.S. dollar a safe haven currency during the pandemic? How does this compare to the baseline case?

2. Assume that you and the Porsche’s management team decided to hedge using forward contracts. Assume that the expected final sales volume is 35,000. What are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)
   a) if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€?

   b) if the investors consider the U.S. dollar a safe haven currency during the pandemic?

3. As the CFO, you decided to hedge using option contracts. Assuming expected final sales volume is 35,000, what are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)
   a) if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€?

   b) if the investors consider the U.S. dollar a safe haven currency during the pandemic?

4. Assume that the Scenario 2 (Pandemic) took place in 2020 and the euro became a safe haven currency during the pandemic. What are your euro cash flows if you did not hedge, hedged using forward contracts, and hedged using option contracts?

5. Assume that the Scenario 2 (Pandemic) took place in 2020 and the U.S. dollar became a safe haven currency during the pandemic. What are your euro cash flows if you did not hedge, hedged using forward contracts, and hedged using option contracts?

6. Based on the calculations in Part B, do you believe that it is a good policy to hedge Porsche’s currency exposure? Why?

2. Plant, Property and Equipment

On January 2, 2016, SaulGroup purchased equipment at a cost of $5 million. The equipment has a five-year life, no residual value, and is depreciated on a straight- line basis. On January 2, 2018, the fair value of the equipment (net of any accumulated depreciation) is determined as $6 million.

a. If the revaluation model is applied for measurement subsequent to initialrecognition under IFRS, what is the impact the equipment has on SaulGroup’s

income in Years 2016 – 2020 using (1) IFRS and (2) U.S. GAAP?
b. How would you explain the difference in income, total assets, and total

stockholders’ equity using IFRS and U.S. GAAP over the period of Years2016 to 2020?

3. Research and Development

In 2016, SaulGroup spent $1 million in developing Product Y. Of this amount, 30% related to development cost (IAS 38 criteria had been met for recognition of the development costs as an intangible asset). The development of Product Y was complete, and the product was available for sale on January 2, 2017. Sales of the product are expected to continue for five years. Straight-line method is used.

a. What is the impact the research and development costs have on SaulGroup’sin 2016 and 2017 income under (1) IFRS and (2) U.S. GAAP?

b. How would you explain the difference in income, total assets, and totalstockholders’ equity related to Product Y using IFRS and U.S. GAAP over the year 2016 and 2017?

Chaz Corporation has taxable income in 2020 of $372,000 for purposes of computing the §179 expense and acquired the following assets during the year:

What is the maximum total depreciation deduction that Chaz may deduct in 2020? (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Round your intermediate calculations and final answer to the nearest whole dollar amount.)