1. You’ve inherited $10,000. You’d like to have $20,000 in 5 years. What rate of return do you need to make on your investment to reach your savings goal?

2. You’re interested in buying a house and need a $5,000 down payment. How much do you need to set aside today if you can make 5% on your money to make sure you have $5,000 in three years.

3. You’ve decided you want to get your MBA, which will cost you $15,000. If you have $10,000 now and can make 7.5% on your money, how soon can you attend classes?

4. You’ve just been hired on your first job! Congratulations. The company has a 401(k) plan and you’ve decided to put 10% of your $45,000 salary away each year. If you can earn 8% annually on your money, how much will you have 35 years from now when you’re ready to retire?

5. You’re aunt Edna just retired at the age of 65 years old. She has an annuity with $750,000 and wants to begin taking payments until she’s 90 years old. If the annuity can earn 4.5% annually, how much can she take each year before the account gets to $0?

6. You have to choose between investing your $1000 in a band CD that pays 2.5% annually, or into a 20 year treasury bond that pays 2.2% semi-annually. Which investment pays a better rate of return?

NATIONAL FARM AND GARDEN, INC., BACKGROUND

(Everyone reads.)

National Farm and Garden, Inc. (NFG) was incorporated in Nebraska in 1935 and has been a leading supplier of farming equipment for more than sixty years. Over the last five years, however, demand for NFG’s flagship product, the Ultra Tiller, has been declining. To make matters worse, NFG’s market lead was overtaken by the competition for the first time two years ago.

Last year, NFG expanded its product line with the Turbo Tiller, a highly advertised and much anticipated upgrade to the Ultra Tiller. The product launch was timed to coincide with last year’s fall tilling season. Due to the timing of the release, the research and development process was shortened, and the manufacturing department was pressed to produce high numbers to meet anticipated demand. All responsible divisions approved the product launch and schedule. In order to release the product as scheduled, however, the manufacturing department was forced to employ the safety shield design from the Ultra Tiller. When attached, the shield protects the user from the tilling blades; however, it is necessary to remove the shield in order to clean the product. Because of differences between the Ultra and Turbo models, the Turbo’s shield is very difficult to reattach after cleaning and the process requires specialized tools. Owners can have the supplier make modifications on site or at the sales location, or they can leave the shield off and continue operation. All product documentation warns against operating the tiller without the shield, and the product itself has three distinct warning labels on it. Modifications are now available that allow for the shield to be removed and replaced quite easily, and these modifications are covered by the factory warranty. However, most owners have elected to operate the Turbo Tiller without the safety shield after its first cleaning.

Over the last year, a number of farm animals (chickens, cats, a dog, and two goats) have been killed by Turbo Tillers being operated without the guard. Two weeks ago, a seven-year-old Nebraska boy riding on the back of an unshielded tiller fell off. When the tiller caught the sleeve of his shirt, his arm was permanently mangled and required amputation. One of the child’s parents owns the local newspaper, which ran a story about the accident on the front page of the local paper the next day. NFG’s CEO has called an emergency meeting with the company’s divisional vice president, director of product development, director of manufacturing, director of sales, and vice president of public relations to discuss the situation and develop a plan of action.

Divisional Vice President

You are the divisional vice president and have been with the company for many years. Historically, you have not been a pushy individual and generally prefer to stay in the background. When there are major decisions to be made or crises to address, you are frequently not available. The CEO recently put you on a sixty-day action plan to improve your division’s output; failure to achieve this plan will result in your termination, even though you are just a few years shy of retirement. Therefore, you now find it necessary to satisfy not only your own objectives, but the CEO’s very high expectations as well. This has caused great turmoil within all divisions because you place increasing pressure on your subordinates.

As the divisional vice president, you are focused on coordinating all departments. You are responsible for output from the sales, manufacturing, and field service engineering departments. The research and development (R&D) department, which must sign off on all new products before they are approved for production, is not under your supervision.

Recently, you received a memorandum from the director of R&D outlining some potential problems with the development and testing of the Turbo Tiller. The memo was copied to you, the director of manufacturing, and the director of sales. You agreed with the director of manufacturing not to share the contents of the memo with your CEO because you felt that bringing this small concern to his attention would cause unnecessary problems for each division. Moreover, the CEO is known for his abrasive personality and has a history of yelling at bearers of bad news.

The CEO has called an all-hands emergency meeting at 7:00 a.m. tomorrow. You are expected to bring all knowledge of this situation with you for discussion and creation of a comprehensive action plan.

Director of Product Development

You are the director of product development. Although you have a master’s degree in mechanical engineering from Stanford University, you are originally from the inner-city area of Chicago, where you grew up in the school of “hard knocks.” From previous experience, you tend to be rather uncompromising about products that are engineered within your organization. Your engineering team has been very successful in the past, and you are quite proud of the many new successful products your department has developed.

You originally fast-tracked the Turbo Tiller product due to constant pressure, particularly from the director of sales. However, on further investigation, you have become concerned about the implementation of the product’s safety shield. Consequently, you recently sent a memorandum to the director of manufacturing, director of sales, and the divisional vice president outlining the fact that consumers could sue National Farm and Garden under the state’s strict liability doctrine, which holds manufacturers, distributors, wholesalers, retailers, and others in the chain of distribution of a defective product liable for the damages caused by the defect, regardless of fault. Moreover, plaintiffs could cite the state’s concept of defect of manufacture when the manufacturer fails to (1) properly assemble a product, (2) properly test a product, and (3) adequately check the quality of the product component parts or materials used in manufacturing. You now believe that NFG has violated all three of these concepts of “defects of manufacture.”

Having received no response to this memo, you are contemplating whether to escalate the issue by going to the CEO. The only reason you have not already done so is the CEO’s historic temper when confronted with negative situations.

The CEO has called an all-hands emergency meeting at 7:00 a.m. tomorrow. You are expected to bring all knowledge of this situation with you for discussion and creation of a comprehensive action plan.

Director of Manufacturing

You are the director of manufacturing. A graduate from the University of Alabama with a B.S. in industrial manufacturing, you have worked for NFG for twenty years. You are required to provide reports to top management on a weekly, monthly, and quarterly basis. Top management creates the exact measures of performance that you provide; although you have a say in what these reports focus on, you often disagree with their exact focus. Your overall performance is evaluated based more on numbers of units produced than on quality. Despite this, you enjoy working for the company. You consider the group like family, and especially appreciate the effort the CEO has made to make you feel valued and supported.

You are aware of the difficulties that the Ultra Tiller guard poses when used on the Turbo Tiller. Due to the Turbo Tiller’s larger size, the guard is nearly impossible to replace after removal. Re-attachment of the shield requires a professional machine shop and additional assistance. However, with your knowledge of statistics, you know that, even without the shield in place, the chances of an animal or a person being injured by the Turbo Tiller are small. Thus, you agreed with the divisional vice president to bury a memo sent by the director of R&D stating related concerns. You both felt that the risks were small enough and that raising these concerns to your superiors would only cause headaches and paperwork. Furthermore, you need to stay on schedule in order to reach your volume goals if you are to earn your bonus.

You have also received several e-mails from the manager of the field service engineering department about reports of farmers operating the Turbo Tiller without the guard. When you requested statistical data regarding the number and location of occurrences and any related accidents, the field service engineering manager replied with field data indicating that more than 85 percent of all Turbo Tillers are eventually operated without the guard.

The CEO has called an all-hands emergency meeting at 7:00 a.m. tomorrow. You are expected to bring all knowledge of this situation with you for discussion and creation of a comprehensive action plan.

Director of Sales

You are the director of sales and have been with NFG for more than ten years. You were recruited from a competing firm and have more than twenty-five years of sales experience in the industry. Because of sagging sales, you face extreme pressure from above to meet your numbers. However, you feel that sales forecasts have been set unrealistically. Furthermore, these aggressive forecasts create churning within your department as your sales staff consistently complains that their quotas are unrealistic. Although you are adamant that declining sales are industry and product offering issues, you are reluctant to raise these concerns to the CEO because of his history of anger directed at messengers bearing bad news. You have witnessed this phenomenon firsthand as the CEO literally screamed at a coworker who brought a problem to his attention. On the other hand, the CEO has promised you a new BMW if your department reaches its numbers this year. Of course, you enthusiastically promised to achieve these results.

The Turbo Tiller has been a much-anticipated addition to your stagnant product portfolio, but you were concerned that it would be delayed due to red tape and wrote daily e-mails to the R&D manager about getting it to market on a timely basis. You have received a memo from the R&D manager about some legal concerns over the Turbo Tiller. However, you feel that these concerns are manufacturing’s problem, not your department’s. Furthermore, because the director of manufacturing received a carbon copy of the memo, you are sure that the concerns will be addressed appropriately.

You have organized training on this product for your sales staff that included proper operating procedures and the dangers of standing within five feet of the tilling blades. In addition to these training sessions, you arranged a separate class on how to address and downplay these concerns with customers.

The CEO has called an all-hands emergency meeting at 7:00 a.m. tomorrow. You are expected to bring all knowledge of this situation with you for discussion and creation of a comprehensive action plan.

Here is the question. please help me to answer this:

1) List the key stakeholders in this scenario.

2) What actions will you take with the family of the injured boy?

3) What actions will you take to move customers from the old tiller to the new version?

4) Are there any other actions you think that should be done?

Which of the following statements is incorrect?

On January 1, Kirk Corporation had total assets of $861,000. During the month, the following activities occurred: Kirk Corporation acquired equipment costing $7,100, promising to pay cash for it in 60 days. Kirk Corporation purchased $3,610 of supplies for cash. Kirk Corporation sold land, which it had acquired 2 years ago. The land had cost $16,100 and it was sold for $16,100 cash. Kirk Corporation signed an agreement to rent additional storage space next month at a charge of $1,110 per month. What is the amount of total assets of Kirk Corporation at the end of the month?

a)$868,100

b)$871,710

c)$832,000

d)$815,900

Zoom Corporation had the following transactions during 2017:

Issued $250,000 of par value common stock for cash.

Declared and paid a cash dividend of $20,000.

Repaid a 6-year note payable in the amount of $440,000 cash.

Recorded cash sales of $800,000.

Recorded and paid wages expense of $120,000.

Bought inventory for cash of $320,000.

Acquired land by issuing common stock of par value $100,000.

Sold a long-term investment (cost $6,000) for cash of $6,000.

Acquired an investment in Zynga stock for cash of $42,000.

  Converted bonds payable to common stock in the amount of $1,000,000.

What is the net cash provided (used) by financing activities?

Fargus Corporation owned 51% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price.

On January 1, 2010, Sanatee sold $1,400,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on April 1, 2012, for 95% of the face value. Both companies utilized the straight-line method of amortization.

a.) Prepare amortization tables for Fargus (4/1/2012 to 12/31/2013) and (1/1/2010 to 12/31/2013)

Mini Quiz (You do not need explanation, just answers from multiple questions.)

1, The Endangered Species Act was originally passed in

• the 1980's.

• the 1930's.

• the 1970's.

• the 1990's.

2, Applying the concept of "clean enough" to climate change, an economist means the

• reversal of climate change such that the average cost of the restoration equals the average benefit of the restoration.

• restoration of the climate to its pre-industrial state, without regard to the consequences.

• slowing down or reversal of climate change such that the marginal cost of the effort equals the marginal benefit of the effort.

• slowing down or reversal of climate change such that the total cost of the effort equals the total benefit of the effort.

3, Most baseball franchises have ________ over the years while the sale price of the typical team has ________.

• made a profit; risen

• lost money; fallen

• made a profit; fallen

• lost money; risen

4, Economists note that a reason exists for policy makers to subsidize sports stadiums, and it is that

• the teams make people happy - even those who don’t go to the games.

• they bring in billions of dollars to their communities.

• they result in large increases in city payrolls.

• they result in enormous increases in taxes.

5, The typical problem for generating parity in sports leagues is that

• there is no means by which players on one team can move to another.

• with no salary cap and with unlimited free agency, big city, high-revenue teams have an advantage.

• no one wants it.

• there is no mechanism for bringing in new talent in a way that helps the bad teams.

6, When considering the wage that owners can pay a player, a reserve clause results in the wage being closer to the player's

• marginal revenue product.

• total revenue product.

• marginal cost.

• reservation wage.

7, The value of a sports franchise to a city’s economy depends greatly on

• the degree to which restaurant revenues rise.

• the degree to which noncitizens spend money in the city.

• the degree to which non-ticket-based sales increase.

• the sale of memorabilia to citizens.

8, The economic value of your college's basketball team is

• decreased if there is more than one college in the area.

• less than it may seem because people substitute a game for another local activity.

• increased if there is more than one college in the area.

• more than it may seem because people substitute a game for another local activity.

9, Jobs in the U.S. textile industry can be saved by imposing tariffs upon textiles imported into the U.S., but the cost to U.S. consumers is estimated to be approximately

• $23,000 annually per job saved.

• $148,000 annually per job saved.

• $49,000 annually per job saved.

• $94,000 annually per job saved.

10, Which of the following works to limit trade by explicitly raising prices (i.e. as a tax)?

• Non-tariff regulatory barriers

• Buy "American advertising"

• Tariffs

11, A quota that limits U.S. imports of cane sugar

• harms U.S. consumers more than it helps U.S. producers.

• helps both U.S. consumers and U.S. producers at the expense of foreign producers.

• harms foreign producers more than it helps U.S. producers.

• helps U.S. producers more than it hurts U.S. consumers.

12, Of the arguments for limiting trade, which one is the most appealing to economists?

• helping an industry that is in trouble

• protecting the profits of companies

• protecting the jobs of citizens

• preventing other countries from getting a comparative advantage by their use of environmentally irresponsible actions

13, Of approximately 140 million jobs in the U.S., each year, approximately

• all jobs eliminated are attributable to global outsourcing.

• 30 million are eliminated and 31 million are created.

• 31 million are eliminated and 30 million are created.

• all jobs eliminated pay lower wages than the new jobs created.

Sunshine Industrial Ltd, a massive retailer of electronic products, is organised in four separate
divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded
based on return on investment (ROI). Last year, the corporation as a whole achieved a ROI of
13 percent.
During the past week, the divisional manager of the Asia-Pacific Division was approached
about the possibility of buying a competitor that had decided to redirect its retail activities. The
following data relates to the recent performance of the Asia-Pacific Division and the competitor:
Asia-Pacific Division Competitor
Sales $8,400,000 $5,200,000
Variable costs 70% of sales 65% of sales
Fixed costs $2,150,000 $1,670,000
Invested capital $1,850,000 $625,000
Management has determined that in order to upgrade the competitor to Sunshine’s standards,
an additional $375,000 of invested capital would be needed.
Required:
(a) Compute the ROI of the Asia-Pacific Division for the following scenarios:
(i) before the competitor is acquired.
(ii) after the competitor is acquired.

(b) Do you think the management of Asia-Pacific Division would accept the acquisition?
Provide explanation to your answer.

(c) Do you think the corporate management of Sunshine would accept the acquisition? Show
all computations to support your answer.

(d) Assume that Sunshine uses residual income to evaluate performance and desires a 12
percent minimum return on invested capital. Compute the residual income of the AsiaPacific Division for the following scenarios:
(i) before the competitor is acquired.
(ii) after the competitor is acquired.

(e) Will the Asia Pacific Division management be likely to change its attitude toward the
acquisition? Provide explanation to your answer.