The company is considering the introduction of a new product that is expected to reach sales of $10 million in its first full year and $13 million of sales in the second and third years. Thereafter, annual sales are expected to decline to two-thirds of peak annual sales in the fourth year and one-third of peak sales in the fifth year. No more sales are expected after the fifth year. The CGS is about 60% of the sales revenues in each year. The GS&A expenses are about 23.5% of the sales revenue. Tax on profits is to be paid at a 40% rate. A capital investment of $0.5 million is needed to acquire production equipment. No salvage value is expected at the end of its five-year useful life. This investment is to be fully depreciated on a straight-line basis over five years. In addition, working capital is needed to support the expected sales in an amount equal to 27% of the sales revenue. This working capital investment must be made at the beginning of each year to build up the needed inventory and implement the planned sales program. Furthermore, during the first year of sales activity, a one-time product introductory expense of $200,000 is incurred. Approximately $1.0 million has already been spent promoting and test marketing the new product.

a. Formulate a multiyear income statement to estimate the cash flows throughout its five-year life cycle.

b. Assuming a 20% discount rate, what is the new product’s NPV?

c. Should the company introduce the new product?

40. What is a typical Day of Arrival (DOA) and pattern for Special Corp customers?

1. Sunday through Wednesday
2. Monday through Thursday
3. Sunday through Thursday
4. Tuesday through Friday

41. What is the typical BMF that management companies get?

a. 3%

b. 5%

c. 2%

d. within 30 days they start getting 3%

42. On the STR report, if the development funnel/ pipeline is strong showing a lot of rooms are being developed what might it indicate?

a. Your brand is has strong preference

b. Owners Priority is being made occasional across the portfolio

c. Owners Priority is being made more quickly than other hotel’s mgt. companies’ brands

d. a and c

42.   When driving sales, revenue management in a group hotel should shrink the hotel by adding great groups, as far out as reasonably possible, know based on history what the cross over goal should be, as long as the groups have what?

a. The right number of customers

b. The right average rate

c. The largest total spend possible

d. The use the banquet and outlet space occasionally

43. If a hotel has a lot of great group room nights on the books in years out, it also allows revenue management to do what important strategy?

a. Open discounts

b. Close out discounts

c. Close out all corporate, association, and other group.

d. focus on driving transient higher rates

Hervis Car Rental in Austin, Texas, has 50 high-performance Shelby-H Mustangs in its rental fleet. These cars will be in greater demand than usual during the last weekend in July when the Central Texas Mustang Club holds its annual rally in Austin. At times like this, Hervis uses a revenue management system to determine the optimal number of reservations to have available for the Shelby-H cars.

Hervis has agreed to have at least 60% of its Shelby-H Mustangs available for rally attendees at a special rate. Although many of the rally attendees will request a Saturday and Sunday two-day package, some attendees may select a Saturday-only or a Sunday-only reservation. Customers not attending the rally may also request a Saturday and Sunday two-day package, or make a Saturday-only or Sunday-only reservation. Thus, six types of reservations are possible. The cost for each type of reservation is shown here.

The anticipated demand for each type of reservation is as follows:

Hervis Car Rental would like to determine how many Shelby-H Mustangs to make available for each type of reservation in order to maximize total revenue.

1. Determine an optimal solution.

An American Legend

Macy’s is an iconic American Company, but like many brick and mortar retailers, it has been struggling to maintain market share. For this case study find the company’s most recent financial statements, including the income statement and balance sheet. There are many sources of this data, but one quick source is Morningstar.com. If you enter the company’s ticket symbol, “M” in the quote box, you will find a report on the company’s stock price as well as a host of other information, such as performance, key ratios, and financials. On the financial tab, you can find the income statement and balance sheet for the past five years.

Question 1- Worth 25points

Looking at Macy’s income statement, what has been the trend in sales (total Revenue) over the past three years? What can you conclude from this? What picture does it tell?

Question 2- Worth 25points

As you have learned, gross profit is the difference between sales (or total revenues) and cost of sales (or cost of revenue). What is Macy’s gross profit for the last three years? What does this data tell you about Macy’s pricing strategy and costs?

Question 3- Worth 25points

Looking at Macy’s income statement, what has been the trend in net income over the past three years? What can you concluded by this?

Question 4- Worth 25points

What is the relationship between the price of Macy’s stock and earnings? What are the earnings per share for each of the past three years, and what does that number mean to investors?

Miller Cereals is a small milling company that makes a single brand of cereal. Recently, a business school intern recommended that the company introduce a second cereal in order to “diversify the product portfolio.” Currently, the company shows an operating profit that is 20 percent of sales. With the single product, other costs were twice the cost of rent.

The intern estimated that the incremental profit of the new cereal would only be 7.5 percent of the incremental revenue, but it would still add to total profit. On his last day, the intern told Miller’s marketing manager that his analysis was on the company laptop in a spreadsheet with a file name, NewProduct.xlsx. The intern then left for a 12-month walkabout in the outback of Australia and cannot be reached.

When the marketing manager opened the file, it was corrupted and could not be opened. She then found an early (incomplete) copy on the company’s backup server. The incomplete spreadsheet is shown as follows. The marketing manager then called a cost management accountant in the controller’s office and asked for help in reconstructing the analysis.

Required:

As the management accountant, fill in the blank cells. (Do not round intermediate calculations. Round your final answers to the nearest whole number. Enter all amounts as positive values.)

Miller Cereals

Projected Income Statement

For One Year

... Reconciliations required to yield government-wide financial statements from fund financial statements and preparation of financial statements                                                   
The City of Jackson Hole is preparing its government-wide financial statements for the year. Its accountant must prepare a number of journal entries to recognize assets and liabilities previously omitted from the fund financial statements and to recognize revenues and expenses for the year under accrual accounting that were not recognized under the current financial resources measurement focus and the modified accrual basis of accounting used to prepare the Statement of Revenues, Expenditures, and Changes in Fund Balances for its funds.

a. Prepare the journal entries for the required reconciliations to recognize the following in the government-wide financial statements (all amounts in $1,000s):

1. Recognize Capital Assets of $968,320 as of the beginning of the year.
2. Record Depreciation Expense of $48,416 for the year and reverse Expenditures of $58,099 for Capital Outlays during the year.
3. Recognize $7,000 of Bonds Payable as of the beginning of the year.
4. Reverse Other Financing Sources of $2,000 and Expenditures—Debt Payments of $700 relating to increases and decreases in the bond liability during the year.
5. Reverse Deferred Revenue of $132,600 as of the beginning of the year.
6. Reverse $6,630 of Deferred Revenue recognized during the year.
7. Recognize Compensated Absences of $19,366 as of the beginning of the year and an increase in that liability of $968 during the year.
8. Recognize $20 of Accrued Interest Payable as of the beginning of the year and an increase in that liability of $33 during the year.
9. Recognize a liability of $26,629 relating to the City’s landfill as of the beginning of the year. The estimate for this liability did not change during the year.

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 65 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,500 per month plus $45 per course plus $6 per student. The company’s sales should average $850 per student.

The company planned to run four courses with a total of 65 students; however, it actually ran four courses with a total of only 61 students. The actual operating results for September appear below:

Required:

Prepare a flexible budget performance report that shows both revenue and spending variances and activity variances for September (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Create the class

• Constructor with no arguments
  • sets the date to be January 1, 1900
• Constructor with arguments
  • CALLS THE SET FUNCTIONS to set the Month, then set the Year, and then set the Day - IN THAT ORDER
• Get methods (accessors) return the field that the get refers to
• setDate - CALLS THE SET FUNCTIONS to set the Month, then set the Year, and then set the Day - IN THAT ORDER
• setMonth - checks to see if it is a valid month, if it isn't valid, it prints a message and sets the month to 1
• setYear - checks to see if it is a valid year, if it isn't valid (negative is invalid), it prints a message and sets the year to 1900
• setDay - checks to see if it is a valid day for the month that was entered. It also check for leap year (using the method isLeapYear), If the day is not valid, it prints a message and sets the day to 1
• isLeapYear- returns true if it is a leap year and false if it is not
• determineSeason - returns the season. The seasons are Winter, Spring, Autumn, or Summer The dates for each season are:
  Spring: March 20 - June 20
  Summer: June 21 - September 21
  Autumn: September 22 - December 20
  Winter: December 21 - March 19
• printDate- prints the date in the following format: XX/XX/XXXX it does not have a new line at the end.

Once the Date class is complete, Create a Main class and copy the main given below into it.

Follow the directions in the main method. There is one method you have to write

Put your statements below the comments, so you know what the directions are for that particular section

import java.util.Scanner;
public class Main
{
    public static Scanner kb = new Scanner(System.in);
    public static void main(String [] args)
    {
        Date birth;
        String again;

        // Refer to format for all formatting
        // Ask the user to type in if they want to enter their birthday



        // make a loop that will allow them to continue entering dates
        // until the don't answer with a y - you are just adding the boolean expression
        while(...)
        {
            // call the enterDate method to allow user to enter the date


            System.out.println();
            // Call method to print date


            //Using method in class print out if it is a leapyear or not


            //Using method in class print out the season


           // Ask the user to type in if they want to enter their birthday
           // This is basically asking if they want to do it again



            System.out.println();
        }

    }

    // Method: enterDate
    // This method asks the user to enter the month, day, and year
    // It then creates an object and returns the object


}

Sample Output

Do you want information about your birthday Y/N? Y
Enter the month: 3
Enter the day: 20
Enter the year: 2000

Date entered: 03/20/2000
You were born in a leap year
You were born in the Spring
Do you want information about your birthday Y/N? y

Enter the month: 12
Enter the day: 21
Enter the year: 1998

Date entered: 12/21/1998
You were not born in a leap year
You were born in the Winter
Do you want information about your birthday Y/N? y

Enter the month: 2
Enter the day: 29
Enter the year: 1995
29 is an invalid day. Day will be set to 1.

Date entered: 02/01/1995
You were not born in a leap year
You were born in the Winter
Do you want information about your birthday Y/N? y

Enter the month: 2
Enter the day: 29
Enter the year: 2008

Date entered: 02/29/2008
You were born in a leap year
You were born in the Winter
Do you want information about your birthday Y/N? Y

Enter the month: 6
Enter the day: 20
Enter the year: 1999

Date entered: 06/20/1999
You were not born in a leap year
You were born in the Spring
Do you want information about your birthday Y/N? y

Enter the month: 9
Enter the day: 22
Enter the year: -5
-5 is an invalid year. Year will be set to 1900.

Date entered: 09/22/1900
You were not born in a leap year
You were born in the Autumn
Do you want information about your birthday Y/N? Y

Enter the month: 13
Enter the day: 15
Enter the year: 2000
13 is an invalid month. Month will be set to 1.

Date entered: 01/15/2000
You were born in a leap year
You were born in the Winter
Do you want information about your birthday Y/N? y

Enter the month: 9
Enter the day: 31
Enter the year: 1984
31 is an invalid day. Day will be set to 1.

Date entered: 09/01/1984
You were born in a leap year
You were born in the Summer
Do you want information about your birthday Y/N? n

The Midland Corporation (MC) was established in 1994. Glenn Jones founded the corporation, which was privately owned at the time.

MC was originally formed to provide ship repair services and quickly earned a Department of Defense (DOD) certified Alteration Boat Repair (ABR) designation. Among its specialties were structural welding, piping system installation and repairs, electrical, painting, rigging, machinery and dry-lock work, as well as custom sheet metal fabrication. Other divisions of MC included Habitability Installation, Industrial Contracting, and Alteration/Installation Teams (AIT).

In 1998, the company went public and its initial public offering was very successful. The stock price had risen from its initial value of $10 to its current level of $30 per share. There were currently five million shares outstanding. In 1999, the company issued 30-year annual bonds at par, with a face value of $1,000 and a coupon rate of 10% per year, and managed to raise $40 million for expansion. Currently the AA-rated bonds had 25 years left until maturity and were being quoted at 92.5% of par.

Over the past year, MC utilized a new method for fabricating composite materials that the firm’s engineers had developed. In June of last year, management established the Advanced Materials Group (AM Group), which was dedicated to pursuing this technology. The firm recruited Barry Rock, a senior engineer, to head the AM Group. Barry also had an MBA from a prestigious university under his belt.

Upon joining MC, Barry realized that most projects were being approved on a “gut feel” approach. There were no formal acceptance criteria in place. Up until then, the company had been lucky in that most of its projects had been well selected and it had benefited from good relationships with clients and suppliers.

Barry stopped into your cubicle and said, “This has to change. We can’t possibly be this lucky forever. We need to calculate the firm’s hurdle rate.” Having recently joined the company after graduating from Northwood University, you jump at the opportunity to assist. “Great, we are receiving bids for a new project in two weeks, have a report on my desk by then” Barry said.

You begin your project by researching and gathering your data. You contact the Finance Department and they indicate the company has maintained its bond rating since it issued debt and ironically the yield on new debt the same as it was then. The Finance Department also tells you that the 1-year Treasury bill yield is 4%, the expected return on the market is 10%, and MC’s beta is 1.5. You then contact the Accounting Department and they tell you that MC’s corporate tax rate is 34% and that they don’t see any reason dividends won’t continue to grow at the same rate they have the past six to seven years. They also provide you with the copy of the most recent balance sheet and a summary of the company’s sales, EPS, and DPS for the last seven years (see Table 1& 2). You decide to use the existing capital structure using market values instead of book values (do not include current liabilities in this calculation).

Table 1

Table 2

Once you got back to your desk you had an email from Barry asking you several questions to make sure are covered in your report:

1. Why do you think we need to estimate the firm’s hurdle rate and how can we use it to our advantage? Is it justifiable to use the firm’s weighted average cost of capital as the divisional cost of capital? Be sure to provide a thorough explanation.
2. What did you determine the firm’s cost of debt to be? Can you walk me through how you calculated it?
3. Will you explain to me why there is a cost associated with our retained earnings? Isn’t this our money?
4. I’m not sure which approach we should use to calculate the firm’s cost of retained earnings, will you use two of them (hint: CAPM and DCF) and take the average of them? Can you explain to me how you determined each of these? Do we need to make an adjustment for taxes?
5. I heard Jim Cramer talk about “Flotation Costs”, what are they? How are they going to impact our analysis?
6. What did you determine our WACC to be? Will you explain to me the steps so I can present it to our Board?
7. Can we safely assume that the hurdle rate will remain constant? Please explain and if not, how often should we adjust our analysis?