assign4

Assignment 4: Units 4 and 5 (8%)

Instructions:

Start by opening Microsoft Word on your device and creating a new document. Once you have created your assignment document, go to the File Menu and select, “Save as”; choose the storage location where you want to save it (your hard drive/memory stick/folder etc.). Choose “save type” as *.docx. Type the file name as “MNGT1711-your last name-your student id-Assignment 4” and save. Double click on the saved file and use it to develop your Assignment 4.

You will submit this assignment as an MS Word report and a copy of your Excel spreadsheet. The title page must include your name, ID, course name, assignment name/number and university name. The report should use Calibri (body) font size 12 and be double-lined spacing. If you use references, create them on a separate page and cite the sources in APA format.

Unit 4 Questions

Question 1: 20 marks

Give your answer in about 300–400 words.

Choose two advertising campaigns that you have witnessed recently. Choose one that you think is effective and choose another which you think is not effective. What differences in these campaigns make one better than the other?

Question 2: 25 marks

Describe a situation when it might be appropriate to use each of the following pricing strategies. Give your answer in about 400–500 words.

· Discounts

· Mail-in Rebates

· Bundling pricing

· Psychological pricing

· Prestige pricing

Unit 5 Questions

Question 3: 25 marks

Answer the following questions in about 400–500 words.

· Which statement(s) will a company’s shareholders find most useful and why?

· Which statement(s) will a company’s contractors or suppliers find most useful and why?

· Which statement(s) will a company’s customers having product warranties for the company’s products, find most useful and why?

· Which statement(s) would be useful to other firms who are interested in acquiring this company, and why?

· Which statement(s) would the Canada Revenue Agency be most interested in and why?

Question 4 (Debt vs Equity Finance): 30 marks

In this question, you are asked to compare two similar sized firms in terms of return on equity ratio. Each firm needs $1 million capital to operate. Firm A runs on 100% equity funds (i.e. zero debt) supplied by owners. Firm B which is highly leveraged operates on 60% debt and 40% equity funds. Under good market conditions, the sales for each firm are expected to be $1.2 million and under poor market conditions, the sales are expected to be $500,000.

Cost of goods sold is expected to be 50% of the sales. Operating expenses are set at 60% of the cost of goods sold. Corporate income taxes are paid at 30% rate on taxable income. The current interest rate on borrowed money is 10%.

A. Prepare an Excel sheet to calculate the net profit (or net income) for each company using the data above. The Excel sheet should also calculate the return on equity ratio.  Paste the Excel sheet below and also submit a copy of your Excel spreadsheet with your assignment.

B. Using the current interest rate and the Excel work above, which company will perform better in terms of return on equity ratio under:

· Good market conditions?

· Poor market conditions?

C. Using an interest rate of 15% and the Excel work above, which company will perform better in terms of return on equity ratio under:

· Good market conditions?

· Poor market conditions?

Note:

You are required to submit your Excel spreadsheet when submitting Assignment 4.