C31_Midterm_Winter_2010_with_KEY - Management C31 (Sections...

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Unformatted text preview: Management C31 (Sections L01 & L30) Midterm Examination, Winter 2010 February 12 th Professor Hugh Laurence & Jeff Rybak 2010, 7-9 p.m. You will have 2 hours to write this midterm, beginning at 7pm and ending at 9pm. It will be marked out of 100. There is one question. The exam has 3 pages. Rita Gupta never set out to establish herself in business. She earned her PhD in early childhood development and was working successfully as an academic. Then she had a daughter and less than one year later added twin sons to her family. She took an extended leave to care for her young children at home. While she was doing so she put her education to good use and designed a program for them to follow. She wanted to do everything possible to give her kids a head start in life. Rita has a lot of friends, and many of them are mothers such as herself, torn between professional careers and young families. Most of Ritas friends found they couldnt get away from their jobs so easily, but rather than enroll their children in daycare or hire someone to care for them at home, they far preferred the idea of sending them to Rita to benefit from her training. First one then another approached her with this request, and offered her very good rates for her services. So Rita got a license to operate a private daycare from her home, calling it Head Start Childcare. Soon she was making as much money from home as she used to in her career as an academic and of course she could still care for her own children as well. There are limits and drawbacks to running a daycare from your own home. Rita hired two part-time workers to come in and help her but the business was taking over all her living space and she still didnt have enough room for all the children. Her waiting list started to grow. Some of Ritas earliest clients approached her with a proposal. They thought she was doing a great job and they wanted to invest in an expansion of her daycare. After some negotiation they arrived at a deal. Four of Ritas clients wanted to go into business with her, and together they formed a corporation. They called this Head Start Childcare Inc. Rita agreed to sell her established business to the corporation in exchange for 5000 shares in the corporation and $50,000 in secured bonds to mature over the next five years. The other four women bought different numbers of shares at $10/each. Lucy Lin purchased 8000 shares. Maria Jones bought 3000. Tina Yu and Lindsay Goldman bought 2000 each. Rita was concerned about losing control over her business (something she felt very strongly about) and everyone agreed that she would remain President and Executive Director of the company permanently, unless she resigned or was fired for cause by the board. We have a unanimous agreement here regarding Ritas role as President and Executive Director. It is binding, in case anyone brings that up. It really only sets up the scenario, but students are welcome to comment on it....
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This note was uploaded on 07/20/2011 for the course MGMT 31 taught by Professor Rayed during the Spring '11 term at University of Toronto- Toronto.

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C31_Midterm_Winter_2010_with_KEY - Management C31 (Sections...

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