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Brad’s company, an eastern based firm, is going through tough times. Downsizing is the only way to keep the company from going bankrupt. Brad has been given the assignment to eliminate an unprofitable region. His analysis has shown that the southwest region has a positive contribution margin but a net loss due to fixed costs. The western region has a positive contribution margin and a net loss. The eastern region has a positive contribution margin and a net income. The northeastern region has a positive contribution margin but a net loss. Brad further discovers that the net losses of the western and southwestern regions are due to fixed costs. Further investigation finds that the fixed costs can be separated by region costs and corporate costs. In Brad’s investigation, the eastern region, though having all the costs of a corporate office, has lower fixed costs, making it a profitable region. Brad finds that Joe Black, the manager of the eastern region, has decided to allocate all the corporate office expenses to the other three divisions to make his region appear more profitable. More analysis indicates that if the corporate offices are allocated evenly to all four regions, the eastern region would have a net loss and the other regions would have a slight net income. What should Brad do? Should Joe have the ability to allocate costs to other regions?
What is a measure of the sensitivity of a stock or portfolio to market risk?
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Describe the strategic implications that would need to be considered in setting a price for a Campbell soup product (Any Soup).
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XYZ Corp. has an 8 percent preferred stock that is currently selling for $120 per share. If the par value is $100, what is the cost of preferred stock to the firm?
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You want to have $3 million in real dollars in an account when you retire in 40 years. The nominal return on your investment is 10 percent and the inflation rate is 4 percent. What real amount must you deposit each year to achieve your goal?
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