1.

What do you think of Mazda Motors UK’s efforts to benchmark its benefits package on an
annual basis? 2. As a prospective employee, would you have more interest in working for a
company that conducts such benchmarking? 3. What are the benefits and costs associated with
giving employees a free car to drive? In what

For what reasons do employees start or join unions?

Discuss the following statement: Union security means job security for union members.

1. Which steps in the employee selection process shown earlier in Figure appear in this scene?
Which steps did Bobby Bowfinger skip? 2. Does Bobby Bowfinger have valid selection criteria
for filling the role of the Kit Ramsey lookalike? Do you predict Jiff Ramsey’s success as a
Kit Ramsey substitute? 3. Which type of

Why is organizational capability important to firm and how can HR managers enhance it?

See Full Question And Answer at solutionrank.com

1. What do you think are the main strengths of UPS’s career development program? 2. What
are the key outcomes that UPS wants to achieve? 3. What suggestions do you have for improving
the program? When Jordan Colletta joined UPS in 1975, fresh out of school and newly married,
he wasn’t thinking about building a car

What steps does the firm need to take to reconcile labor supply and labor demand?

Explain the difference between a firm’s corporate strategy and business strategy. Why do
firms need to look at both aspects?

Reinforcement theory and behavior modification have been called demeaning because they tend
to treat people “like mice in a maze.” Do you agree?

Explain the difference between adverse impact and disparate treatment. Provide examples
illustrating how adverse impact and disparate treatment discrimination can exist.

See Full Question And Answer at solutionrank.com

1. Does Lt. Tyler analyze the submarine’s external environment? Does he engage in
environmental scanning as described earlier in this chapter? 2. What is Lt. Tyler’s
assessment of the submarine’s strengths and weaknesses? 3. Does Lt. Tyler consider threats
and opportunities in forming his strategic plan? Has he d

1. Do these scenes show external or internal recruitment? 2. Recall an earlier discussion in this
chapter of the employee’s role in career planning. What does Carter do to help his career? 3.
Review the earlier section “Career Development Initiatives.” Which of those initiatives
appear in these scenes? What is Ma
1. What impact do you think Hire.com’s screening tools have had on the HR departments of
Southern and Plantronics? 2. What competitive advantages do you see in using online screening
tools to screen applicants? 3. Do you see any drawbacks associated with the Hire.com system,
and, if so, how might they be addressed?

What are the objectives of picketing?

What is a grievance? Describe the typical grievance procedure.

See Full Question And Answer at solutionrank.com

Under what circumstances are strikes and lockouts justified in place of mediation or arbitration?

In your opinion, what is the most important role of HR managers?

In what ways do the techniques of mediation and arbitration differ?

Identify and describe the major techniques for motivating employees.

The job characteristics model has five components that enhance employee jobs— skill variety,
task identity, task significance, autonomy, and feedback. Give an example illustrating how each
component can be used to improve the organization and the job of the employee.

See Full Question And Answer at solutionrank.com

1. Why do you think companies like Dole need succession planning? 2. Do you see any
disadvantage of “automating” succession planning? With 61,000 workers in more than
ninety countries, Dole Food Company has talent all over the world. Only a few hundred of those
employees are in top management at the 151-year-old c

What are the advantages and disadvantages of filling openings from internal sources?

Managers at The Container Store believe that satisfied employees will be highly motivated to
satisfy their customers. The company’s enviably low turnover rate is a clear indication of its
employees’ satisfaction, just as its ability to expand and prosper year after year is a clear
indication of its customers’ sat

EEO legislation was prompted by significant social events. List those events and describe how
they influenced the passage of various EEO laws.

Growing Annuity You have just won the lottery and will receive $1,000,000 in one year. You
will receive payments for 25 years, which will increase 5 percent per year. If the appropriate
discount rate is 9 percent, what is the present value of your winnings?

See Full Question And Answer at solutionrank.com

Calculating Annuities due you want to buy a new sports car from Muscle Motors for $61,000.
The contract is in the form of a 60-month annuity due at an 8.15 percent APR. What will your
monthly payment be?

Discounted Cash Flow Analysis if the appropriate discount rate for the following cash flows is
11 percent compounded quarterly, what is the present value of the cashflows?

Interest Rate Risk Bond J is a 4 percent coupon bond. Bond K is a 12 percent coupon bond. Both
bonds have eight years to maturity, make semiannual payments, and have a YTM of 7 percent. If
interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds?
What if rates suddenly fall by 2 per

How did the results of the Hawthorne Studies influence researchers’ thinking about
employee motivation?

Band Ratings Companies pay rating agencies such as Moody’s and S&P to rate their bonds,
and the costs can be substantial. However, companies are not required to have their bonds rated;
doing so is strictly voluntary. Why do you think they do it?

See Full Question And Answer at solutionrank.com

Calculating a Balloon Payment you have just arranged for $450,000 mortgage to finance the
purchase of a large tract of land. The mortgage has an 8.5 percent APR, and it calls for monthly
payments over the next 30 years. However, the loan has an eight-year balloon payment, meaning
that the loan must be paid off then. Ho

Calculating Annuity Future Values You are planning to make monthly deposits of $250 into a
retirement account that pays 10 percent interest compounded monthly. If your first deposit will
be made one month from now, how large will your retirement account be in 30 years?

Rule of 72 ‘Earlier, we discussed the Rule of 72, a useful approximation for many interest
rates and periods for the time it takes a lump sum to double in value. For a 10 percent interest
rate, show that the “Rule of 73” is slightly better. For what rate is the Rule of 72 exact?
(Hint: Use the Solver function in

Calculating Loan Payments You need a 30-year, fixed-rate mortgage to buy a new home for
$220,000, your mortgage bank will lend you the money at a 6.8 percent APR for this 360-month
loan. However, you can afford monthly payments of only $1,100, so you offer to pay off any
remaining loan balance at the end of the loan in

Interest Rate Risk which has greater interest rate risk, a 30-year Treasury bond or a 30-year BB
corporate bond?

See Full Question And Answer at solutionrank.com

Real Cash Flows you want to have $1 million in real dollars in an account when you retire in 40
years. The nominal return on your investment is 11 percent and the inflation rate is 4.5 percent.
What real amount must you deposit each year to achieve your goal?

Holding Period Yield the YTM on a bond is the interest rate you earn on your investment if
interest rates don’t change, if you actually sell the bond before it matures, your realized
return is known as the holding period yield (HPY). a. Suppose that today you buy an 8 percent
annual coupon bond for $1,105. The bond h

Coupon Rate how does a bond issuer decide on the appropriate coupon rate to set on its bonds?
Explain the difference between the coupon rate and the required return on a bond.

Nominal and Real Returns an investment offers a 15 percent total return over the coming year
Bill Bernanke thinks the total real return on this investment will be only 7 percent. What does
Bill believe - the inflation rate will be over the next year?

Interpreting Bond Yields Is the yield to maturity on a bond the same thing as the required return?
Is YTM the same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par.
Two years from now, the required return on the same bond is 8 percent. What is the coupon rate
on the bond then the YTM?

See Full Question And Answer at solutionrank.com

Calculating Annuity Values you are serving on a jury. A plaintiff is suing the city for injuries
sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five
years before the plaintiff is able to return to work. The jury has already decided in favor of the
plaintiff. You are the

Accrued Interest You purchase a bond with a coupon rate of 7.5 percent and a clean price of
$865. If the next semiannual coupon payment is due in three months, what is the invoice price?

Using Bond Quotes Suppose the following bond quotes for IOU Corporation appear in the
financial page of today’s newspaper. Assume the bond has a face value of $1,000 and the
current date is April 15, 2007. What is the yield to maturity of the bond? What is the current
yield? What is the yield to maturity on a compara

Perpetual Cash Flows What the value of an investment that pays $7,500 every other year forever,
if the first payment occurs one year from today and the discount rate is 11 percent compounded
daily? What is the value today if the first payment occurs four years from today?

Calculating Interest Expense you receive a credit card application from Shady Banks Savings
and Loan offering an introductory rate of 2.5 percent per year, compounded monthly for the first
six months, increasing thereafter to 17 percent compounded monthly. Assuming you transfer the
$5,000 balance from your existing cre
See Full Question And Answer at solutionrank.com

Calculating Annuity Payments this is a classic retirement problem. A time line will help in
solving it. Your friend is celebrating her 35th birthday today and wants to start saving for her
anticipated retirement at age 65. She wants to be able to withdraw $90,000 from her savings
account on each birthday for 20 years f

Comparing Cash Flow Streams you’ve just joined the investment banking firm of Dewey,
Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have
$90,000 per year for the next two years, or you can have $65,000 per year for the next two years,
along with a $45,000 signing bonus today. The

Variable Interest Rates a 15-year annuity pays $1,500 per month, and payments are made at the
end of each month. If the interest rate is 13 percent compounded monthly for the first seven
years, and 10 percent compounded monthly thereafter, what is the present value of the annuity?

Calculating the Number of Periods Your Christmas ski vacation was great, but it unfortunately
ran a bit over budget. All is not lost: You just received an offer in the mail to transfer your
$10,000 balance from your current credit card, which charges an annual rate of 18.2 percent, to a
new credit card charging a rate

Rule of 69.3 a corollary to the Rule of 72 is the Rule of 69.3. The Rule of 69.3 is exactly correct
except for rounding when interest rates are compounded continuously. Prove the Rule of 69.3 for
continuously compounded interest,

See Full Question And Answer at solutionrank.com

Rating Agencies A controversy erupted regarding bond-rating agencies when some agencies
began to provide unsolicited bond ratings. Why do you think this is controversial?

Calculating EAR with Points the interest rate on a one-year loan is quoted as 12 percent plus two
points (see the previous problem). What is the EAR? Is your answer affected by the loan
amount?

Calculating EAR a local finance company quotes a 15 percent interest rate on one-year loans. So,
if you borrow $20.000, the interest for the year will be $3.000. Because you must repay a total of
$23,000 in one year, the finance company requires you to pay $23,000/12, or $1,916.67, per
month over the next 12 months. Is

Calculating Annuity Values Bilbo Baggins wants to save money to meet three objectives. First,
he would like to be able to retire 30 years from now with retirement income of $20,000 per
month for 20 years, with the first payment received 30 years and 1 month from now second; he
would like to purchase a cabin in Rivendel
Calculating EAR with Points you are looking at a one-year loan of $10,000. The interest rate is
quoted as 9 percent plus three points. A point on a loan is simply 1 percent (one percentage
point) of the loan amount. Quotes similar to this one are common with home mortgages. The
interest rate quotation in this example r

See Full Question And Answer at solutionrank.com

Bonds as Equity the 100-year bonds we discussed in the chapter have something in common
with junk bonds. Critics charge that, in both cases, the issuers are really selling equity in
disguise. What are the issues here? Why would a company want to sell “equity in
disguise”?

Coupon Rates Hawk Enterprises has bonds on the market making annual payments, with 16
years to maturity, and selling for $870. At this price, the bonds yield 7.5 percent. What must the
V coupon rate be on the bonds?

Discount Interest Loans this question illustrates what is known as discount interest imagine you
are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one
year. The interest rate is 14 percent. You and the lender agree that the interest on the loan will
be .14 X $20,000 = $2,800. So

Finding the Bond Maturity Jude Corp. has 9 percent coupon bonds making annual payments with
a YTM of 6.3 percent. The current yield on these bonds is 7.1 percent. How many years do these
bonds have left until they mature?

Calculating Annuity Payments You want to be a millionaire when you retire in 40 years, how
much do you have to save each month if you can earn an 11 percent annual return? How much
do you have to save if you wait 10 years before you begin your deposits? 20 years?

See Full Question And Answer at solutionrank.com

Bond Prices Carpenter, Inc., has 8 percent coupon bonds on the market that have 10 years left to
maturity. The bonds make annual payments. If the YTM on these bonds is 9 percent, what is the
current bond price?

Accrued Interest you purchase a bond with an invoice price of $1,090. The bond has a coupon
rate of 8.6 percent, and there are five months to the next semiannual coupon date. What is the
clean price of the bond?

Real and Nominal Returns Are there any circumstances under which an investor might be more
concerned about the nominal return on an investment than the real return?

Amortization with Equal Payments Prepare an amortization schedule for a five-year loan of
$36,000, the interest rate is 9 percent per year, and the loan calls for equal annual payments.
How much interest is paid in the third year? How much total interest is paid over the life of the
loan?

Calculating Annuities Due As discussed in the text, an ordinary annuity assumes equal payments
at the end of each period over the life of the annuity. An annuity due is the same thing except the
payments occur at the beginning of each period instead. Thus, a three-year annual annuity due
would ha e periodic payment cas

See Full Question And Answer at solutionrank.com

Present Value and Break-Even Interest Consider a firm with a contract to sell an asset for
$145,000 three years from now. The asset costs $94,000 to produce today. Given a relevant
discount rate on this asset of 13 percent per year, will the firm make a profit on this asset? At
what rate does the firm just break even?

Calculating Future Values you have an investment that will pay you 1.08 percent per month.
How much will you have per dollar invested in one year? In two years?

Calculating Rates of Return Suppose an investment offers to quadruple your money in 12 months
(don’t believe it). What rate of return per quarter are you being offered?

Comparing Cash Flow Streams you have your choice of two investment accounts. Investment A
is a 15-year annuity that features end-of-month $1,000 payments and has an interest rate of 9.5
percent compounded monthly. Investment B is a 9 percent continuously compounded lump sum
investment, also good for 15 years. How much

Growing Annuity Your job pays you only once a year for all the work you did over the previous
12 months. Today, December 31, you just received your salary of $50,000 and you plan to spend
all of it. However, you want to start saving for retirement beginning next year, You have decided
that one year from today you will

See Full Question And Answer at solutionrank.com

Calculating Real Rates of Return If Treasury bills are currently paying 8 percent and the inflation
rate is 45 percent, what is the approximate real rate of interest the exact real rate?

Calculating Present Value of a Perpetuity Given an interest rate of 5.7 percent per year, .what is
the value at date t = 7 of a perpetual stream of $5,000 payments that begins at date t = 15?

Coupon Rates Wimbley Corporation has bonds on the market with 14.5 years to maturity, a
YTM of 6.8 percent, and a current price of $1,136.50. The bonds make semiannual payments.
What must the coupon rate be on these bonds?
Calculating Annuity Present Values You want to borrow $55,000 from your local bank to buy a
new sailboat, you can afford to make monthly payments of $1,120, but no more. Assuming
monthly compounding, what is the highest rate you can afford on a, 60-month APR loan?

Calculating EAR with Add-On Interest This problem illustrates a deceptive way of quoting
interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy’s
Stereo City that reads something like this: “$1,000 Instant Credit! 13% Simple Interest! Three
Years to Pay low. Low Monthly Payments

See Full Question And Answer at solutionrank.com

Bond Yields Ngata Corp. issued 12-year bonds 2 years ago at a coupon rate of 9.2 percent. The
bonds make semiannual payments. If these bonds currently sell for 104 percent of par value,
what is the YTM?

Yield to Maturity treasury bid and ask quotes are sometimes given in terms of yields, so there
would be a bid yield and an ask yield. Which do you think would be larger? Explain.

Zero Coupon Bonds suppose your company needs to raise $20 million and you want to issue 30-
year bonds for this purpose. Assume the required return on your bond issue will be 7 percent,
and you’re evaluating two issue alternatives: a 7 percent annual coupon bond and a zero
coupon bond. Your company’s tax rate is 35

Inflation and Nominal Returns Suppose the real rate is 4 percent and the inflation rate is 5.8
percent what rate would you expect to see on a Treasury bill?

Components of Bond Returns bond P is a premium bond with a 9 percent coupon. Bond D is a 5
percent coupon bond currently selling at a discount. Both bonds make annual payments; have a
YTM of 7 percent, and have five years to maturity. What is the current yield for bond P for bond
0? It’ interest rates remain unchange

See Full Question And Answer at solutionrank.com

Nominal versus Real Returns Say you own an asset that had a total return last year of 14.2
percent. If the inflation rate last year was 5.3 percent, what was your real return?

Valuing the Call Feature Consider the prices in the following three Treasury issues as of May 15,
2007:

Amortization with Equal Principal Payments Rework Problem 55 assuming that the loan
agreement calls for a principal reduction of $7,200 every 5iear instead of equal annual payments.

Calculating Annuity Present Values Beginning three months from now, you want to be able to
withdraw $1,500 each quarter from your bank account to cover college expenses over the next
four, years. If the account pays .75 percent interest per quarter, how much do you need to have in
your bank account today to meet your e

Term Structure what is the difference between the term structure of interest rates and the yield
curve?

See Full Question And Answer at solutionrank.com

Call Provisions a company is contemplating a long-term bond issue. It is debating whether to

include a call provision. What are the benefits to the company from including a call provision?
What are the costs? How do these answers change for a put provision?

Bond Yields Linebacker Co. has 7 percent coupon bonds on the market with nine years left to
maturity. The bonds make annual payments. If the bond currently sells for $1,080, what is its
YTM?

Discounted Cash Flow Analysis If the appropriate discount rate for the following cash flows is
8.45 percent per year, what is the present value of the cashflows?

Treasury pricing with regard to bid and ask prices on a Treasury bond, is it possible for the bid
price to be higher? Why or why not?

Calculating EAR a check-cashing store is in the business of making personal loans to walk-up
customers. The store makes only one-week loans at 8 percent interest per week. a. What APR
must the store report to its customers? What EAR are customers actually paying? b. Now
suppose the store makes one-week loans at 8 perce

See Full Question And Answer at solutionrank.com

Calculating Present Values a 5-year annuity often $6,000 semiannual payments will begin 9
years from now, with the first payment coming 9.5 years from now. If the discount rate is 10
percent compounded monthly, what is the value of this annuity five years from now? What is the
value three years from now? What is the cu

Valuing Bonds The Marigold Corporation has two different bonds currently outstanding. Bond
M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the
first six years, then pays $1,100 every six months over the subsequent eight years, and finally
pays $1,400 every six months over the last

Interest on Zeroes Snowflake Corporation needs to raise funds to finance a plant expansion, and
it has decided to issue 25-year zero coupon bonds to raise the money. The required return on the
bonds will be 8 percent. a. What will these bonds sell for at issuance? b. Using the IRS
amortization rule, what interest deduc
Calculating Growing Annuities you have 30 years left until retirement and want to retire with $1
million. Your salary is paid annually, and you will receive $55,000 at the end of the current year.
Your salary will increase at 3 percent per year, and you can earn a 10 percent return on the
money you invest. If you save

Interest Rate Risk Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual
payments, and are priced at par value. Bond Sam has 2 years to maturity, whereas Bond Dave
has. 15 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage
change in the price of Bond Sam of Bond Dave?

See Full Question And Answer at solutionrank.com

Calculating Annuities you are planning to save for retirement over the next 30 years. To do this,
you will invest $600 a month in a stock account and $300 a month in a bond account. The return
of the stock account is expected to be 12 percent, and the bond account will pay 7 percent. When
you retire, you will combine y

Calculating Annuity Values After deciding to buy a new car, you can either lease the car or
purchase it on a three-year loan. The car you wish to buy costs 528.000. The dealer has a special
leasing arrangement where you pay $1 today and $380 per month for the next three years. If you
purchase the car, you will pay it o

Bond Prices Cutler Co. issued 11-year bonds a year ago at a coupon rate of 7.8 percent. The
bonds make semiannual payments. If the YTM on these bonds is 8.6 percent, what is the current
bond price?

Bond Yields Giles Co. wants to issue new 20-year bonds for some much-needed expansion
projects. The company currently has 7 percent coupon bonds on the market that sell for $1,062,
make semiannual payments, and mature in 20 years. What coupon rate should the company set
on its new bonds if it wants them to sell at par?

Present and Future Values the present value of the following cash flow stream is $6,785 when
discounted at 10 percent annually. What is the value of the missing cash flow? Year Cash Flow 1

See Full Question And Answer at solutionrank.com

Calculating Interest Rates a financial planning service offers a college savings program. The plan
calls for you to make six annual payments of $5,000 each, with the first payment occurring
today, your child’s 12th birthday. Beginning on your child’s 18th birthday the plan will
provide $15,000 per year for four yea

Calculating Annuity Values an All-Pro defensive lineman is in contract negotiations. The team
has offered the following salary structure: All salaries are to be paid in lump sums. The player
has asked you as his agent to renegotiate the terms. He wants a $9 million signing bonus payable
today and a contract value incre

EAR versus 4PR you have just purchased a new warehouse. To finance the purchase, you’ve
arranged for a 30-year mortgage loan for 80 percent of the $2,400,000 purchase price. The
monthly payment on this loan will be $13,000. What is the APR on this loan the EAR?

Calculating Present Values You just won the TVM Lottery. You will receive $1 million today
plus another 10 annual payments that increase by $400,000 per year. Thus, in one year, you
receive $1.4 million. In two years you get $1.8 million, and so on. If the appropriate, interest rate
is 9 percent, what is the present va

Bond Price Movements Bond X is a premium bond making annual payments. The bond pays a 9
percent coupon, has a YTM of 7 percent, and has 13 years to maturity. Bond Y is a discount
bond making annual payments. This bond pays a 7 percent coupon, has a YTM of 9 percent and
also has 13 years to maturity. If interest rates r

See Full Question And Answer at solutionrank.com

Bond Yields Caribbean Reef Software has 8.4 percent coupon bonds on the market with nine
years to maturity. The bonds make semiannual payments and currently sell for 95.5 percent of
par. What is the current yield on the bonds the YTM the effective annual yield?

Bond Market what are the implications for bond investors of the lack of transparency in the bond
market?

Bond Prices versus Yields a. What is the relationship between the price of a bond and its YTM?
b. Explain why some bonds sell at a premium over par value while other bonds sell at a discount.
What do you know about the relationship between the coupon rate and the YTM for premium
bonds? What about for discount bonds for

Interpreting Bond Yields Suppose you buy a 7 percent coupon, 20-year bond today -when
it’s first issued. If interest rates suddenly rise to 15 percent, what happens to the value of
your bond? Why?

Break-Even Investment Returns your financial planner offers you two different investment plans.
Plan X is a $15,000 annual perpetuity. Plan Y is a 10-year, $20,000 annual annuity. Both plans
will make their first payment one year from today. At what discount rate would you be
indifferent between these two plans?

See Full Question And Answer at solutionrank.com

Finding the Maturity you’ve just found a 10 percent coupon bond on the market that sells for
par value. What is the maturity on this bond?
Present Value and Multiple Cash Flows What is the present value of $2,000 per year, at a
discount rate of 10 percent, if the first payment is received 9 years from now and the last
payment is received 25 years from now?

Ordinary Annuities and Annuities Due As discussed in the text, ‘an annuity due is identical to
an ordinary annuity except that the periodic payments occur at the beginning of each period and
not at the end of the period. Snow that the relationship between the value ‘of an ordinary
annuity and the value of an otherw

Crossover Bonds Looking back at the crossover bonds we discussed in the chapter, why do you
think split ratings such as these occur?

EAR versus APR Two banks in the area offer 30-year, $220,000 mortgages at 7.2 percent and
charge a $1,500 loan application fee, however, the application fee charged by Insecurity Bank
and Trust is refundable if the loan application is denied, whereas that charged by I.M. Greedy
and Sons Mortgage Bank is not. The curren

See Full Question And Answer at solutionrank.com

Simple Interest versus Compound Interest First Simple Bank pays 6 percent simple interest on its
investment accounts. If First Complex Bank pays interest on its accounts compounded annually,
what rate should the bank set if it wants to match First Simple Bank over an investment horizon
of 10 years?

Present Value and Interest Rates what is the relationship between the value of an annuity and the
level of interest rates? Suppose you just bought a 10-year annuity of $7,000 per year at the
current interest rate of 10 percent per year. What happens to the value of your investment if
interest rates suddenly drop to 5 p

Calculating the Number of Payments you’re prepared to make monthly payments of $225,
beginning at the end of this month, into an account that pays 9 percent interest compounded
monthly. How many payments will you have made when your account balance reaches $20,000?

Treasury Bonds is it true that a U.S. Treasury security is risk-free?

Present Value of a Growing Perpetuity What is the equation for the present Value of a growing
perpetuity with a payment of C one period from today if the payments grow by C each period?

See Full Question And Answer at solutionrank.com

Future Value and Multiple Cash Flows An insurance company is offering a new policy to its
customers. Typically, the policy is bought by a parent or grandparent for a child at the child’s
birth. The details of the policy are as follows: The purchaser (say, the parent) makes the
following six payments to the insurance
Calculating EAR you are looking at an investment that has an effective annual rate of 18 percent.
What is the effective semiannual return, the effective quarterly return the effective monthly
return?

Municipal Bonds why is it that municipal bonds are not taxed at the federal level, but are taxable
across state lines? Why are U.S. Treasury bonds not taxable at the state level? (You may need to
dust off the history books for this one.)

Calculating Annuity Future Values In the previous problem, suppose you make $3,000 annual
deposits into the same retirement account, how large will your account balance be in 30 years?

You have recently been given the responsibility to update all of the company’s job
descriptions to comply with the Fair Labor Standards Act (FLSA) classifications. The company
president believes his secretary is an exempt employee and she is not eligible for overtime pay
when she works more than 40 hours in a workwee

See Full Question And Answer at solutionrank.com

A process of performance management is developed in companies to better shape how

employees execute their job responsibilities and complete their work. Ideally, employees should
feel comfortable with this process, believing that the communication occurring between
managers and workers facilitates the completion of impo

Your company now has more than 60 employees. The controller has been handling all of the HR
functions including administration of the company’s benefits. The benefits package includes
health, dental, 401(k) and other voluntary benefits. You are considering outsourcing the benefits
administration function to enable th

Why are companies offering employees inflated job titles? Do you agree with this practice?
Justify your position.

Bond Ratings U.S. Treasury bonds are not rated. Why? Often, junk bonds are not rated. Why?

Many companies in the United States have recently put an end to the practice of giving an annual
employee Christmas party due to complaints by employees with non-Christian religious
backgrounds or spiritual values who claimed the Christmas party was a discriminatory
employment practice. These employees argued that the

See Full Question And Answer at solutionrank.com

Your insurance company needs to update the sales incentive program for its sales/marketing
representatives. Due to growth in the volume and diversity of the products being sold, the
existing system of having one incentive program for all sales marketers no longer meets the
needs of the company. To maximize sales in eac
Discuss why JC Penney’s shift to a more performance-oriented compensation system had to
be linked to market pricing.

3M's competitive business strategy is based on innovation. 3M requires that at least 25 percent of
its annual sales come from products introduced over the previous five years, a goal it often
exceeds. Specific HR programs adopted to implement this strategy include the creation of a
special fund that allows employees to

An increasing number of firms discipline employees for smoking and some conduct random
testing to check for nicotine use, even if such use takes place on the employee's free time. Do
you think a company has the right to monitor and punish employees for behaviors that may
increase company costs, even if they are legal a

Kate has severe diabetes that seriously limits her ability to eat. Even when taking insulin to help
manage her diabetes, Kate must test her blood sugar several times a day and strictly monitor the
availability of food, the time she eats, and the type and quantity of food she eats to avoid serious
medical consequences.

See Full Question And Answer at solutionrank.com

Based on the information discussed in the chapter, how would you oversee the design (or
redesign) of a benefits program in a large organization? What issues would you consider?

Do you believe that managers should be given more autonomy to make personnel decisions such
as hiring, appraising, and compensating subordinates? If so, what are some potential drawbacks
to granting them this authority? Explain.

Discuss how NOV’s efforts combine different phases of talent management to reach a
successful result.

What role, if any, should the HR department play in reducing the pay gap between men and
women? Explain.

Your company now has more than 60 employees. The controller has been handling all of the HR
functions including administration of the company’s benefits. The benefits package includes
health, dental, 401(k) and other voluntary benefits. You are considering outsourcing the benefits
administration function to enable th

See Full Question And Answer at solutionrank.com

Many believe that top managers care little about human resources compared to such areas as
marketing, finance, production, and engineering. What might account for this perception, and
what would you do to change it?
Design a management development program for first-level supervisors in an electric utility
company. What courses and experiences do they need?

Why do you think the pay gap between men and women has been so persistent? Do you agree or
disagree with the explanations offered by the two women professors as discussed in the case?
Explain.

Discuss how the availability of disease management, training programs, and a nursing hotline
might help with health benefits costs.

You own a small construction business. One of your workers is 55 years old and had heart
bypass surgery about six months ago. He wants to come back to work, but you are concerned
that he will not be able to handle the job's physical tasks. What should you do? What are you
prohibited from doing? What laws apply in this

See Full Question And Answer at solutionrank.com

What are the tangible and intangible benefits that Walgreens receives by being a leader in hiring
employees with disabilities?

Some management experts do not agree that a virtual team is really a team at all. Based on the
definition of a team, what properties of a virtual team satisfy the definition of a team? Do any
aspects of a virtual team give rise to doubts over whether it satisfies the definition of a true team?
Suppose you needed to org

How can an individual show prima facie evidence for adverse impact discrimination? How
would an employer defend itself from this evidence?

What personal qualities do you think are necessary for a couple with children to have successful
careers? How would you select for those qualities? Explain.

What are alternative ways to manage employee behavior so they do not harm their former
employer after they quit? Are there any HR practices that could be used to achieve this outcome?

See Full Question And Answer at solutionrank.com

Identify some of the advantages and disadvantages of eliminating the use of appraisal forms and
ratings?

Why do you think Michael Calderone had mixed feelings about using an offshore outsource
company in the Philippines?

According to Laura D'Andrea Tyson, Dean of the College of Business at London Business
School, in both the United States and Europe women often choose to opt out of high-powered
jobs. In her words: "The opt-out hypothesis could explain why, according to a recent U.S.
survey, 1 in 3 women with an MBA is not working full-

Some male senior executives avoid becoming mentors to younger women because of their fear of
possible sexual harassment claims against them (as retribution for a romantic relationship that
ends badly) or office gossip suggesting the mentoring pair are having a romance. Do you think it
is reasonable for male executives

What personal qualities do you think are necessary for an employee to be successful at a
company such as Zappos? How would you select for those qualities? Explain.

See Full Question And Answer at solutionrank.com

Are managers likely to question the work commitment of their contingent workers? What might
be the consequences for management when the majority of a company's workforce consists of
temporary employees and contract workers?

Two generations ago or so, many HR articles decried problems with performance appraisal. A
common complaint was that managers did not devote sufficient time to conducting the appraisals
and that biases were rampant. Another common complaint was that most managers gave high
ratings to all employees and did not bother to

Describe the broad range of talent management efforts that use software applications by going to
www.learn.com. Then give some examples of firms that have successfully used these
applications.

What are the disadvantages to the employer of offshore outsourcing?

Scripps Health is a long-standing and prominent nonprofit health-based organization that is

based in the greater San Diego area. The organization experienced a severe financial downturn
that led to increased employee discontent and turnover, as well as the exit of the firm’s CEO.
In an effort to fix these problems, C

See Full Question And Answer at solutionrank.com

What role should HR professionals play in helping a new company (such as Zappos' situation ten
years ago) grow and become successful? What special HR challenges is the company likely to
face as it moves from a startup to a more mature stage? Broadly speaking, what HR
recommendations would you offer the company to deal

Your insurance company needs to update the sales incentive program for its sales/marketing
representatives. Due to growth in the volume and diversity of the products being sold, the
existing system of having one incentive program for all sales marketers no longer meets the
needs of the company. To maximize sales in eac
A recent trend more and more companies are embracing is to outsource all or most of their
human resource management activities. Do you agree or disagree with this trend? What risks is a
company taking when it decides to outsource its entire set of human resource management
activities? Try to describe a situation in whi

A process of performance management is developed in companies to better shape how

employees execute their job responsibilities and complete their work. Ideally, employees should
feel comfortable with this process, believing that the communication occurring between
managers and workers facilitates the completion of impo

What do you see as the main differences between a specific job description and a general job
description?

See Full Question And Answer at solutionrank.com

If you were the top Japanese executive of the trading company, what steps would you take to
prevent the actual or purported behaviors taking place at the U.S. subsidiary (Marubeni America
Corp.)? Explain.

Can you think of a job where beauty can be used as a basis for selecting an employee for a job?
How would beauty be determined in this situation?

What are the drawbacks to using flexible work hours from the organization's perspective?
Compressed workweeks? Telecommuting? How should the HR department deal with these
challenges?

In recent years, there has been an increase in the number of companies that have wrongly
classified an "employee" as a "contract worker" and, consequently, were taken to court by
workers who believed they were entitled to certain rights and privileges enjoyed by individuals
who were given "employee" status. What are so

What are some of the possible advantages and disadvantages of the “draft approach” to
placing candidates in business units?

See Full Question And Answer at solutionrank.com

Earlier in this chapter, you learned that most work in today's workplace is now being done by
teams of employees. In your opinion, does the intensive use of self-managed teams make it
easier or more difficult for employees to achieve work-life balance? Explain.

Under the ADA, is an obese individual considered to have a disability and therefore be eligible
for coverage? Explain.

Gunderson Lutheran Health System in La Crosse, Wisconsin, is a health care delivery company
that includes a 325-bed hospital, several specialty medical practices, and 41 clinics. In a recent
year, they saw 1.4 million outpatient visits. The network has 6,834 employees including
physicians, medical staff, managers and s

Suppose several people are employed in the same job as the one for which you are writing a job
description. Would it be necessary to write a different job description for each person who works
in the same job?

Why did the court reject the defense of Heartland Inns that beauty should be considered a bona
fide occupational qualification for the job of front desk clerk?

See Full Question And Answer at solutionrank.com

Explain why HR decisions are heavily regulated. Based on your analysis of current social forces,
what new laws or regulations do you think will be passed or issued in the next few years?

Many employers offer incentives to employees working in different jobs. Often, the incentives
are to reward employee performance, both in the short and the long term. But some company
incentive plans are viewed negatively by employees, while others are seen as highly positive by
employees at all levels. One firm that h

What impact could inflated job titles have on the HR practices of job analysis and job
descriptions within a company?

Describe how an organizational culture and the use of performance criteria and standards affect
the remaining components of a performance management system.

Suppose you are a supervisor. What errors might you make when preparing the performance
appraisal on a clerical employee? How might you avoid those errors?

See Full Question And Answer at solutionrank.com

What consequences are likely to result from the problems at the Northern Sigma plant? Explain
your answer.

Companies need to offer competitive benefits to employees or risk having employees become
dissatisfied with their current job situations. KPMG Canada recently faced such a challenge
when the company’s portfolio of benefits was viewed by employees as uncompetitive
compared to packages offered by other high-performing

Doug Dokolosky, a former IBM executive who specializes in coaching women, argues that "to
reach the top requires sacrifice and long hours. If that is your ambition, forget things like
balancing work and family . . ." Do you think most U.S. firms just pay lip service to family
accommodation policies? Can you think of an
Based on your experiences, as well as the chapter information, what are some good “rules of
thumb” for conducting successful performance appraisal interviews?

Even though there have been some high-visibility cases in recent years, the number of raids and
fines on employers who hire undocumented workers is tiny, some would say symbolic. This is in
spite of a federal law on the books for almost 25 years (the Immigration and Control Act of
1986) whereby employers can be fined $

See Full Question And Answer at solutionrank.com

You have been named Human Resources Manager for a company that has 180 employees and no
formal base pay system. What steps will you take to develop such a coordinated system?

Are job descriptions really necessary? What would happen if a company decided not to use any
job descriptions at all?

Many employers offer incentives to employees working in different jobs. Often, the incentives
are to reward employee performance, both in the short and the long term. But some company
incentive plans are viewed negatively by employees, while others are seen as highly positive by
employees at all levels. One firm that h

Describe the nature and components of, and the issues currently facing, executive compensation
in various U.S. industries.

Why is having multiple health-care plans important for FedEx in slowing down increases in the
cost of benefits?

See Full Question And Answer at solutionrank.com

As the new HR Director of a company in the behavioral health industry, you have the
responsibility to develop a performance management system. You need to present a business
case to senior executives that the performance management system does not stand alone and
must be integrated into the company’s strategic plan,

Discuss how this case illustrates the conflict between the administrative use and developmental
use of appraisals.

How should Sands' top executives deal with the complaints expressed by supervisors? How
should the director of the HR department deal with the situation? Explain.

You have recently been given the responsibility to update all of the company’s job
descriptions to comply with the Fair Labor Standards Act (FLSA) classifications. The company
president believes his secretary is an exempt employee and she is not eligible for overtime pay
when she works more than 40 hours in a workwee
What diversity practices would you put in place to prevent the kinds of behaviors alleged in this
case? Explain.

See Full Question And Answer at solutionrank.com

What is adverse impact? How does it differ from adverse treatment?

How do the JC Penney changes reflect a total rewards approach?

Review the performance appraisal process and appraisal form used by a current or former
employer, and compare them with those provided by other students. Also review other appraisal
issues by going to www.workforce .com and searching for articles on performance appraisals.
Develop a report suggesting changes to make th

Go back to Manager's Notebook, "How Small Companies Try to Promote Employees' Mental
Health and Wellness." If you were the owner of a small company with less than 20 employees,
what steps would you take to help employees deal with work related stress and personal
problems? Explain.

Only about half of the disabled people who want to work are employed. What barriers do people
with disabilities face in obtaining employment that are not concerns of other groups protected by
the EEOC, such as minorities, women, or the aged?

See Full Question And Answer at solutionrank.com

Discuss the compensation philosophies and approaches that have been used at organizations
where you have worked. What have been the consequences of those philosophies and
approaches?

Why might the use of incentives in the form of gift certificates be better than just providing cash
to employees?

Which types of jobs are best suited for flexibility with regards to hours and office location?
Which types of jobs are less likely to afford this type of flexibility? Explain.

If you had to develop a list of compensation best practices, what practices would be on your list?
Develop the list, and compare your findings with those of your classmates.

Discuss why variable pay-for-performance plans have become popular and what elements are
needed to make them successful.

See Full Question And Answer at solutionrank.com

Suppose you have been asked to lead a taskforce to develop a sales incentive plan at your firm.
The taskforce is to generate a list of strategies and issues to be evaluated by upper management.
Using details from www.salescompensation.org and other related websites, identify and develop
preliminary materials for the ta

What are some advantages and disadvantages of a sales incentive program in which the top
performers receive a trip or other large reward, while other sales individuals receive lesser or
different types of rewards?

Go back to the Manager's Notebook, "A Cold Way to Get a Job" What do you see as the main
advantages and disadvantages of Internet-based recruiting? Explain.

Do you think it is feasible to boil down human behavior to numbers? What are the potential
advantages and disadvantages of doing so? Explain.

What are bona fide occupational qualifications (BFOQ)? What is a business necessity? Can race
be a BFOQ? Can it be a business necessity? Why or why not?

See Full Question And Answer at solutionrank.com

Population size is static or declining in developed nations, where birth rates tend to be low and
the number of elderly is increasing rapidly. Developing nations, where birth rates are higher, will
account for most of the increase in population from 2010 to 2050. In several European countries,
the native population is

What seems to be the main source of conflict between supervisors and the HR department at
Sands Corporation? Explain.

Is it possible to use quantitative assessments of the organization's human resources to better link
human resource management to firm strategy? Explain.

How has the increase in uncertainty in business affected the “make-or-buy” decision, and is
this trend likely to change?

Discuss what talent management is and why it is a consideration addressed by a growing number
of employers.

See Full Question And Answer at solutionrank.com

Go to the Web sites of Avon (www.avon.com), PepsiCo (www.pepsico.com), and Xerox

(www.xerox.com) and explore those sites to learn more about the women who are either the
CEO or chairperson at these companies. Several of the Web sites have a "biography of
executives" feature to learn more about the CEO and other top exe

What is the purpose of a noncompete agreement? Do you think it is ethical for a company to
require its employees to sign a noncompete agreement as a condition of employment? Under
what conditions do you consider it to be acceptable for an employer to ask an employee to sign a
noncompete agreement?

Recently, the movie The Class was shown at the New York Film Festival, to the displeasure of
many French. The actors were young Parisians. According to one movie critic, with their cell
phones and pouts, these bored restless junior high school students look pretty much the fidgety
progeny of Anytown, U.S.A. One differe

Gunderson Lutheran Health System in La Crosse, Wisconsin, is a health care delivery company
that includes a 325-bed hospital, several specialty medical practices, and 41 clinics. In a recent
year, they saw 1.4 million outpatient visits. The network has 6,834 employees including
physicians, medical staff, managers and s

What specific recommendations would you offer Wagner to improve the management of
diversity at the Chicago plant?

See Full Question And Answer at solutionrank.com

Give examples of individual incentives used by an organization in which you were employed,
and then describe why those plans were or were not successful.

As the new HR Director of a company in the behavioral health industry, you have the
responsibility to develop a performance management system. You need to present a business
case to senior executives that the performance management system does not stand alone and
must be integrated into the company’s strategic plan,

What do you think are the main reasons for the trend toward "managing by the numbers," as
discussed in the case? Do you believe that this is happening in many organizations, or is it an
isolated phenomenon? Will this trend grow in the future, or is it another passing fad? Explain.

Would you like to work for a company such as Zappos? What do you see as the main advantages
and disadvantages of doing so? Explain.

Net Working Capital In our capital budgeting examples we assumed that a firm would recover
all of the working capital it invested in a project. Is this a reasonable assumption? When might it
not be valid?

See Full Question And Answer at solutionrank.com

Opportunity Cost In the context of capital budgeting, what is an opportunity cost?

Calculating Payback Old Country, Inc., imposes a payback cutoff of three years for its
international investment projects. If the company has the following two projects available,
should it accept either ofthem?
Stock Valuation Great Pumpkin Farms just paid a dividend of $3.50 on its stock. The growth rate
in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a 16
percent return on the stock for the first three years, a 14 percent return for the next three years,
and an 11 percent return

Gunderson Lutheran Health System in La Crosse, Wisconsin, is a health care delivery company
that includes a 325-bed hospital, several specialty medical practices, and 41 clinics. In a recent
year, they saw 1.4 million outpatient visits. The network has 6,834 employees including
physicians, medical staff, managers and s

A project has the following cash flows: What is the IRR for this project? If the required return is
12 percent, should the firm accept the project? What is the NPV of this project? What is the NPV
of the project if the required return is 0 percent 24 percent? What is going on here? Sketch the
NPV profile to help you wi

See Full Question And Answer at solutionrank.com

Two-Stage Dividend Growth Model Chartreuse County Choppers Inc. i experiencing rapid
growth, the company expect dividends to grow at 25 percent per year for the next nine years
before leveling off at 6 percent into perpetuity. The required return on the company’s stock is
12 percent. If the dividend per share just pa

Erosion in evaluating the Cayenne, would you consider the possible damage to Porsche’s
reputation erosion?

Real Cash Flows When Marilyn Monroe died ex-husband Joe DiMaggio vowed to place fresh
flowers on her grave every Sunday as long as he lived. The week after she died in 1962, a bunch
of fresh flowers that the former baseball player thought appropriate for the star cost about $5.
Based on actuarial tables, “Jolt in’

Stock Values the next dividend payment by Top Knot, Inc., will be $2.50 per share. The
dividends are anticipated to maintain a 5percent growth rate forever. If the stuck currently sells
for $48.00 per share, what is the required return?

Capital Budgeting Problems What difficulties might come up in actual applications of the
various criteria we discussed in this chapter? Which one would be the easiest to implement in
actual applications the most difficult?

See Full Question And Answer at solutionrank.com

Two-Stage Dividend Growth Model one of the assumptions of the two-stage growth model is
that the dividends drop immediately from the high growth rate to the perpetual growth rate. What
do you think about this assumption? What happens if this assumption is violated?
NPV and Discount Rates An investment has an installed cost of $724,860. The cash flows over
the four-year life of the investment are projected to be $324,186, $375,085, $354,302, and
$205,680. If the discount rate is zero, what is the NPV? If the discount rate is infinite, what is the
NPV? At what discount rate is the

Profitability Index Concerning the profitability index: a, Describe how the profitability index is
calculated, and describe the information this measure provides about a sequence of cash flows.
What is the profitability index decision rule? b. What is the relationship between the profitability
index and NPV? Are there

Capital Budgeting Considerations a major college textbook publisher has an existing finance
textbook. The publisher is debating whether to produce an “essentialized” version, meaning
a shorter (and lower-priced) book. What are some of the considerations that should come into
play? To answer the next three questions

Calculating AAR you’re trying to determine whether to expand your business by building a
new manufacturing plant. The plant has an installation cost of $18 million, which will be
depreciated straight-line to zero over its four-year life. If the plant has projected net income of
$1,632,000, $2,106,500, $1,941,700, and

See Full Question And Answer at solutionrank.com

Corporate Ethics is it unfair or unethical for corporations to create classes of stock with unequal
voting rights?

Calculating Payback An investment project provides cash inflows of $860 per year for eight
years. What is the project payback period if the initial cost is $3,000? What if the initial cost is
$5,000? What if it is $7,000?

NPV versus IRR Consider the following two mutually exclusive projects: Sketch the NPV
profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover
rate for these twoprojects?

Multiple IRRs this problem is useful for testing the ability of financial calculators and computer
software. Consider the following cash flows. How many different IRRs are there?

Capital Budgeting in Not-for-Profit Entities Are the capital budgeting criteria we discussed
applicable to not-for-profit corporations? How should such entities make capital budgeting
decisions? What about the U.S. government? Should it evaluate spending proposals using these
techniques?

See Full Question And Answer at solutionrank.com

Calculating IRR what is the IRR of the following set of cashflows?

Dividend Growth Model Under what two assumptions can we use the dividend growth model
presented in the chapter to determine the value of a share of stock? Comment on the
reasonableness of these assumptions.

Stock Values Stairway Corporation will pay a $3.60 per share dividend next year. The company
pledges to increase its dividend by 4.5 percent per year indefinitely. If you require an 11 percent
return on your investment, how much will you pay for the company’s stock today?

Valuing Preferred Stock Best Rate Bank just issued some new preferred stock. The issue will pay
a $10 annual dividend in perpetuity, beginning 10 years from now. If the market requires a 7
percent return on this investment, how much does a share of preferred stock cost today?

Capital Budgeting In evaluating the Cayenne, what do you think Porsche needs to assume
regarding the substantial profit margins that exist in this market? Is it likely they will be
maintained as the market becomes more competitive, or will Porsche be able to maintain the
profit margin because of its image and the perfo

See Full Question And Answer at solutionrank.com

Stock Values the Jackson—Timberlake Wardrobe Co. just paid a dividend of $1.60 per share on
its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely.
If investors require a 12 percent return on The Jackson— Timberlake Wardrobe Co. stock, what
is the current price? What wil

NPV and IRR Anderson International Limited is evaluating a project in Erewhon. The project
will create the following cash flows: All cash flows will occur in Erewhon and are expressed in
dollars. In an attempt to improve its economy, the Erewhonian government has declared that all
cash flows created by a foreign comp

Calculating NPV for the cash flows in the previous problem, what is the NPV at a discount rate
of zero percent? What if the discount rate is 10 percent if it is 20 percent if it is 30 percent?

Payback Period concerning payback: a. Describe how the payback period is calculated, and
describe the information this measure provides about a sequence of cash flows. What is the
payback criterion decision rule? b. What are the problems associated with using the payback
period to evaluate cash flows? c. What are the a

Discounted Payback Concerning discounted payback: a. Describe how the discounted payback
period is calculated, and describe the information this measure provides about a sequence of cash
flows. What is the discounted payback criterion decision rule? b. What are the problems
associated with using the discounted payback

See Full Question And Answer at solutionrank.com

Non constant Growth Storico Co. just paid a dividend of $2.75 per share. The company will
increase its dividend by 20 percent next year and will then reduce its dividen4 growth rate by 5
percentage points per year until it reaches the industry average of 5 percent dividend growth,
after which the company will keep a co

Payback and NPV An investment under consideration has a payback of seven years and a cost of
5537.000. If the required return is 12 percent, what is the worst-case NPV the best-case NPV?
Explain. Assume the cash flows are conventional.

Cash Flow and Depreciation “When evaluating projects, we’re concerned with only the
relevant incremental after tax cash flows. Therefore, because depreciation is a noncash expense,
we should ignore its effects when evaluating projects.” Critically evaluate this statement.

Supernormal Growth Janicek Corp. is experiencing rapid growth. Dividends are expected to
grow at 25 percent per year during the next three years, 15 percent over the following year, and
then 8 percent per year indefinitely. The required return on this stock is 14 percent, and the stock
currently sells for $65 per share

Treasury Bonds the following Treasury bond quote appeared in The Wall Street Journal on May
11, 2004: Why would anyone buy this Treasury bond with a negative yield to maturity? How is
thispossible?

See Full Question And Answer at solutionrank.com

Stock Valuation Suppose you know that a company’s stock currently sells for $60 per share
and the required return on the stock is 12 percent. You also know that the total return on the
stock is evenly divided between a capital gains yield and a dividend yield. If it’s the
company’s policy to always maintain a con

Calculating Discounted Payback An investment project has annual cash inflows of $6,500,
$7,000, $7,500, and $8,000, and a discount rate of 14 percent. What is the discounted payback
period for these cash flows if the initial cost is $8,000? What if the initial cost is $13,000? What
if it is $18,000?

Net Present Value Suppose a project has conventional cash flows and a positive we NPV. What
do you know about its payback, its discounted payback, its profitability index, its IRR? Explain.

Common versus Preferred Stock Suppose a company has a preferred stock issue and a common
stock issue. Both have just paid a $2 dividend. Which do you think will have a higher price, a
share of the preferred or a share of the common?

Comparing Investment Criteria Consider the following two mutually exclusive projects:
Whichever project you choose, if any, you require a 15 percent return on your investment. a. If
you apply the payback criterion, which investment will you choose? Why? b. If you apply the
discounted payback criterion, which investme

See Full Question And Answer at solutionrank.com

Two-Stage Dividend Growth the chapter shows that in the two-stage dividend growth model, the
growth rate in the first stage, g1, can be greater than or less than the discount rate, R. Can they be
exactly equal?

Stock Valuation why does the value of a share of stock depend on dividends?

Negative Growth Antiques R Us is a mature manufacturing firm. The company just paid a $10
dividend, but management expects to reduce the payout by 6 percent per year indefinitely. If you
require an 11 percent return on this stock, what will you pay for a share today?

Average Accounting Return Concerning AAR: a. Describe how the average accounting return is
usually calculated, and describe the information this measure provides about a sequence of cash
flows. What is the AAR criterion decision rule? b. What are the problems associated with using
the AAR to evaluate a project’s cash

Capital Gains versus Income Consider four different stocks, all of which have a required return
of 18 percent and a most recent dividend of $4.50 per share. Stocks W, X, and Y are expected to
maintain constant growth rates in dividends for the foreseeable future of 10 percent, 0 percent
and —5 percent per year, respe

See Full Question And Answer at solutionrank.com

Internal Rate of Return Concerning IRR: a. Describe how the IRR is calculated, and describe the
information this measure provides about a sequence of cash flows. What is the IRR criterion
decision rule? b. What is the relationship between IRR and NPV? Are there any situations in
which you might prefer one method over t

Relevant Cash Flows Winnebagel Corp. currently sells 30,000 motor homes per year at $45,000
each, and 12,000 luxury motor coaches per year at $85,000 each. The company wants to
introduce a new portable camper to fill out its product line; it hopes to sell 19,000 of these
campers per year at $12,000 each. An independent

Cash Flow Intuition A project has an initial cost of 1, has required return of R, and pays C
annually for N years. a. Find C in terms of l and N such that the project has a payback period just
equal to its life. b. Find C in terms of I, N, and R such that this is a profitable project according to
the NPV decision rule.

Real Cash Flows you are planning to save for retirement over the next 30 years. To save for
retirement, you will invest $700 a month in a stock account in real dollars and $300 a month in a
bond account in real dollars. The effective annual return of the stock account is expected to be 11
percent, and the bond account

Relevant Cash Flows Parker & Stone, Inc., is looking at setting up a new manufacturing plant in
South Park to produce garden tools. The company bought some land six years ago for $5 million
in anticipation of using it as a warehouse and distribution site, but the company has since decided
to rent these facilities from

See Full Question And Answer at solutionrank.com

Constant Dividend Growth Model Assume a stock has dividends that grow at a constant rate
forever. If you value the stock using the constant dividend growth model, how many years worth
of dividends constitute one-half of the stock’s current prices?

OCF from Several Approaches A proposed new project has projected sales of $96,000, costs of
$49,000, and depreciation of $4,500. The tax rate is 35 percent. Calculate operating cash flow
using the four different approaches described in the chapter and verify that the answer is the
same in each case.

Payback and Internal Rate of Return A project has perpetual cash flows of C per period, a cost of
I, and a required return of R. What is the relationship between the project’s payback and its
IRR? What implications does your answer have for long-lived projects with relatively constant
cash flows?

Dividend Policy referring to the previous questions, under what circumstances might a company
chooses not to pay dividends?

Dividend Growth Model Based on the dividend growth model, what are the two components of
the total return on a share of stock? Which do you think is typically larger?

See Full Question And Answer at solutionrank.com

Calculating OCF Consider the following income statement: Fill in the missing numbers and then
calculate the OCF. What is the depreciation taxshield?

Non constant Growth this one’s a little harder. Suppose the current share price for the firm in
the previous problem is S60.98 and all the dividend information remains the same. What
required return must investors is demanding on Storico stock?

Calculating NPV and IRR a project that provides annual cash flows of $24,000 for nine years
costs $110,000 today is this a good project if the required return is 8 percent? What if it’s 20
per- cent? At what discount rate would you be indifferent between accepting the project and
rejecting it?
Depreciation Given the choice, would a firm prefer to use MACRS depreciation or straight-line
depreciation? Why?

Non constant Growth Metallica Bearings. Inc., is a young start-up company. No dividends be
paid on the stock over the next nine years because the firm needs to plow back its earnings to
fuel growth. The company will pay a $10 per share dividend in 10 years and will increase the
dividend by 6 percent per year thereafter

See Full Question And Answer at solutionrank.com

Payback Period and Net Present Value If a project with conventional cash flows has a payback
period less than the project’s life, can you definitively state the algebraic sign of the NPV?
Why or why not? If you know that the discounted payback period is less than the project’s
life, what can you say about the NPV?

Calculating Profitability, index what is the profitability index for the following set of cash flows
if the relevant discount rate is 10, percent what if the discount rate is 15 percent, if it is
22percent?

Stand-Alone Principle Suppose a financial manager is quoted as saying, “Our firm uses the
standalone principle. Because we treat projects like mini firms in our evaluation process, we
include financing costs because they are relevant at the firm level.” Critically evaluate this
statement.

Net Present Value It is sometimes stated that “the net present value approach assumes
reinvestment of the intermediate cash flows at the required return.” Is this claim correct? To
answer, suppose you calculate the NPV of a project in the usual way. Next, suppose you do the
following: a. Calculate the future value

Calculating IRR A firm evaluates all of its projects by applying the IRR rule. If the required
return is 18 percent, should the firm accept the followingproject?

See Full Question And Answer at solutionrank.com

Two-Stage Dividend Growth Regarding the two-stage dividend growth model in the chapter,
show that the price of a share of stock today can be written as follows: Can you provide an
intuitive interpretation of this expression? Can you provide an intuitive interpretation of
thisexpression?

McKee kin Corp. has a project with the following cash flows: What is the IRR of the project?
What is happeninghere?

MIRR Suppose the company in Problem 19 uses an 11 percent discount rate and an 8 percent
reinvestment rate on all of its projects. Calculate the MIRR of the project using all three methods
using these interest rates.
Two-Stage Dividend Growth Model Formula 51 Corp. just paid a dividend of $1.45 per share.
The dividends are expected to grow at 30 percent for the next eight years and then level off to a 7
percent growth rate indefinitely. If the required return is 13 percent, what is the price of the stock
today?

NPV and the Profitability Index If we define the NPV index as the ratio of NPV to cost, what is
the relationship between this index and the profitability index?

See Full Question And Answer at solutionrank.com

Voting Rights some companies, such as Reader’s Digest have created classes of stock with
no voting rights at all why would investors buy such stock?

Stock Valuation a substantial percentage of the companies listed on the NYSE and NASDAQ
don’t pay dividends, but investors are nonetheless willing to buy shares in them. How is this
possible given your answer to the previous question?

Capital Budgeting Porsche was one of the last manufacturers to enter the sports utility vehicle
market. Why would one company decide to proceed with a product when other companies, at
least initially, decide not to enter the market?

Finding the Dividend Ames Corporation stock currently sells for $50 per share. The market
requires a 13 percent return on the firm’s stock. If the company maintains a constant 5
percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

NPV versus IRR Bumble’s Bees, Inc., has identified the following two mutually exclusive
projects: a. What is the 1RR for each of these projects? Using the IRR decision rule, which
project should the company accept? Is this decision necessarily correct? b. if the required return
is 11 percent, what is the NPV for each

See Full Question And Answer at solutionrank.com

Using Stock Quotes You have found the following stock quote for RJW Enterprises, Inc., in the
financial pages of today’s newspaper. What was the closing price for this stock that appeared
in yesterday’s paper? If the company currently has 25 million shares of stock outstanding,
what was ne income for the most recen

Equivalent Annual Cost When is EAC analysis appropriate for comparing two or more projects?
Why is this method used? Are there any implicit assumptions required by this method that you
find troubling? Explain.

Calculating NPV for the cash flows in the previous problem, suppose the firm uses the NPV
decision rule. At a required return of 11 percent, should the firm accept this project? What if the
required return was 30 percent?