1. This question is on capital structure.
   1. List and explain all the theories on capital structure.
   2. As the CEO of Pokebook, you are contemplating debt issuance. In particular, your CFO suggests a capital restructuring program where the company will issue $7 billion of perpetual debt. Beginning with the definition of a capital restructuring program, explain to your board of directors the reasons of issuing (or not issuing) debt and consequently to restructure the capital of Pokebook.
   3. What factors affect your decision to choose dividend or share repurchase as a way to distribute the money raised under the capital restructuring program?

2. You should highlight different factors (including those not covered in a) to get full credits. All parts have equal weights.

C&P Trading Inc. is considering a project, initial investment is $260,000. The company board of directors set the maximum requirements of return of pay back 3 years and has set the cost of capital is 10%, below is the cash flow: CF1= $75,800 , CF2= $78,960 , CF3= $82,278, CF4= $117,612. (15')

1. Would you accept the project based on NPV, IRR? (4')
2. Would you accept the project based on Payback rule if project cut-off period is 3 years? (3')
3. How would you explain to your CEO what NPV means? (4')
4. What are advantages and disadvantages of using only Payback method? (4')

C&P Trading Inc. is considering a project, initial investment is $260,000. The company board of directors set the maximum requirements of return of pay back 3 years and has set the cost of capital is 10%, below is the cash flow: CF1= $75,800 , CF2= $78,960 , CF3= $82,278, CF4= $117,612. (15')

1. Would you accept the project based on NPV, IRR? (4')
2. Would you accept the project based on Payback rule if project cut-off period is 3 years? (3')
3. How would you explain to your CEO what NPV means? (4')
4. What are advantages and disadvantages of using only Payback method? (4')

DISCUSSION :

We have pointed out that the value chain will indicate many support areas that could be candidates for outsourcing. These are not essential functions (accounting, human resources, training, support technology, facility maintenance, security, phone call center,etc.) for the company and perhaps could be or cheaper and better by an outside firm.

a. Is this a case of "its just business" or is it unethical to outsource certain functions meaning you lay off long term employees that are specialized?

b. Would this be a good reason to outsource? What about the community you are located in?

c. Your thoughts if you are the CEO or top management in the firm?

• Discuss the pro's and con's of these possible actions as if you were top management.

Assume you are the HR director of a tech company located in Jackson, MS. Based on the kind of service it provides, it will see a sharp increase in their business due to the coronanvirus pandemic. Your CEO has tasked you with hiring a significant number of new employees, both professional and non-professional. Professional employees include computer scientists, engineers, designers, accountants, and marketing/sales people. The non-professional employees includes clerical staff, maintenance staff, and custodial staff. How would you go about successfully recruiting each group? How would you ensure the best possible and most diverse applicant pool? Assume that things will be back to normal by summer.

a) Describe the organizational culture at the Newskool. Be sure to use specific course concepts in your answer .

b) Is the culture at the Newskool strong or weak? How do you know?

c) In general, what are the pros and cons of a strong culture?

Imagine you are a senior manager at Newskool Grooves who has been tasked with putting together a cross-functional team that will decide on which type of communication platform the company should use for corporate communications (e.g., email, video conferencing, secure group chats, etc).

Imagine CEO Gerd Finger wishes to introduce a new line of music equipment at Newskool Grooves and that several of the other managers do not like his idea.

Read and complete the Capstone exercise on page 177 and answer all of the questions associated with the case.

In 1885, Binney & Smith had a product line of ONE—An-DuSeptic dustless chalk. While promoting this product to teachers across the United States, the company founders discovered that teachers were importing expensive wax crayons from Europe. In the early 1900s, nearly 20 years after starting the company, Binney & Smith introduced a new product, eight colored crayons packaged in a green and yellow box. Crayola Crayons remain a staple in American classrooms today. The size of the boxes and the selection of colors have changed over the decades, but the basic product remains essentially the same. (The “Big Box” with a mind-boggling 96 crayons was introduced in 1993.) In 1964, Binney & Smith acquired Permanent Pigments, an acrylic paint manufacturer, and in 1977, it acquired the rights to Silly Putty. In 1984, the Binney & Smith company became a wholly owned subsidiary of Hallmark Cards, Inc. In 2007, the Binney & Smith corporate name was changed to Crayola because of the brand familiarity. The name Crayola has a 99% recognition among U.S. consumers. Eighty percent of all the crayons sold in the United States today have the Crayola brand name. Crayola products are sold in 80 different countries and packaged in 12 languages. The name change also reflected the company’s new direction. For nearly 100 years, Crayola targeted children and their parents with a product line of back-to-school products. The products had expanded from crayons to water paints, markers, chalk, colored pencils, and poster paints. However, in an effort to expand the market and generate revenues throughout the year, Crayola entered the toy industry. Bath tub art, glow stations, Color Explosion products, Mess-Free Art, flavored drinking water, and even a colorful computer keyboard and mouse are just some of the products added to the Crayola line. Today in any big box store, Crayola will have shelf space in both the art and school supply aisle AND the toy section.

1. How would you define the attributes and benefits of Crayola products?

2. Define the core, actual, and augmented product benefits.

3. Where was Crayola in the product life cycle before it entered the toy market? Where do you think they are now? Explain.

4. Do you see the move from school supply products to toys as product development? Explain.

5. Describe the Crayola product portfolio strategy.

Reid acquired two assets in 2017: computer equipment (5-year property) acquired on August 6th with a basis of $510,000 and machinery (7-year property) on November 9th with a basis of $510,000. Assume that Reid has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (but not bonus expensing). 1-Section 179 expense? 2-Depreciation on computer? 3-Depreciation on machinery? 4-Total maximum depreciation expense including §179 expense?

The Bookbinder Company has made $300,000 before taxes during each of the last 15 years, and it expects to make $300,000 a year before taxes in the future. However, in 2016 the firm incurred a loss of $750,000. The firm will claim a tax credit at the time it files its 2016 income tax return, and it will receive a check from the U.S. Treasury. Show how it calculates this credit, and then indicate the firm's tax liability for each of the next 5 years. Assume a 35% tax rate on all income to ease the calculations. Enter your answers as positive values. If an amount is zero, enter "0".

1. Prior Years	2014	2015
   Profit earned	$	$
   Carry-back credit	$	$
   Adjusted profit	$	$
   Tax previously paid (35%)	$	$
   Tax refund: Taxes previously paid	$	$

   
   Total check from U.S. Treasury $  
   
2. Firm's tax liability
   2017:    $  
   2018:    $  
   2019:    $  
   2020:    $  
   2021:    $  

3)

BOOER COMPANY

Worksheet (partial)

For the Year Ended December 31, 2018

Instructions

Prepare a classified balance sheet for Booer Company.