Fall_2004_exam_2_answers

Fall_2004_exam_2_answers - Start Strategic Signature...

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Start Strategic Signature Questioning Consider the following data table. Each of the three columns represents selected data from the financial reports of real companies –Microsoft, Procter and Gamble, and United Airlines. Microsoft is in the computer software business distributing its products worldwide. However the dominant channel is sales to computer assemblers like Dell or IBM. Procter and Gamble is in the business of producing consumer products like dishwashing and laundry detergent, disposable diapers, and soap. It sells mostly directly to retailers. United Airlines is a large international passenger air carrier based in the US. In addition to its passenger service it also transports high value cargo. United Airlines sells its products through many different channels. A B C Gross Margin 51% 82% 78% Days Inventory 64 22.8 46.2 ROS 13% 22% -20% Days Receivables 28.8 58.4 24.7 1) Column A best fits. a) Microsoft b) Procter and Gamble c) Whirlpool d) United Airlines 2) Column B best fits a) Microsoft b) Procter and Gamble c) Whirlpool d) United Airlines End Strategic Signature Questions 3) What events cause changes in a corporation's total assets? a) The purchase of inventory for cash. b) The sale of an asset at book value. c) The collection of an account receivable. d) Repayment of long term debt . 4) Your company is considering the purchase of a new machine. The new machine will cost $4,500 to acquire and setup. The machine will save approximately $1,750 per year. After four years the machine will be taken out of service. At that time, your company will have to pay $250 to haul the now useless machine away. Ignoring tax implications, what is the IRR of this machine purchase? a) Less than 10% b) Between 10% and 15% c) Between 15% and 20% d) Between 20% and 25% e) More than 25% 18.91
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5) A marketing consultant proposes an advertising campaign for your company costing $14,000. The campaign will produce an additional $10,000 in income in year 1, $9,000 in year 2 and $8,000 in year 3. If your company uses a discount rate of 30% the net present value of the campaign is: a) Less than $2,500 b) Between $2,500 and $3,000 c) Between $3,000 and $3,500 d) Between $3,500 and $4,000 e) More than $4,000 6) If a company is directing its marketing efforts towards people who come to New England to enjoy the fall foliage (sometimes called “leaf-peepers), the company is probably using: a) demographic segmentation b) geographic segmentation c) psychographic segmentation d) product usage segmentation 7) If a company is directing its marketing efforts towards people who will most frequently use the product outdoors in the rain, the company is probably using: a) demographic segmentation b) geographic segmentation c) psychographic segmentation d) product usage segmentation 8) Increasing unit price generally results in: a) higher unit contribution b) lower unit contribution c) lower breakeven quantity d) a and c only are correct e) b and c only are correct The following questions deal with the new Life-is-Great (LIG) Industries
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Fall_2004_exam_2_answers - Start Strategic Signature...

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