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In early 2008, Doc and Lyn McGee formed the McGee Cake Company. The company produced a full line of cakes, and its specialties included cheese cake, lemon pound cake, and double-iced, double-chocolate cake. The couple formed the company as an outside interest, and both continued to work at their current jobs. Doc did all the baking, and Lyn handled the marketing and distribution. With good product quality and a sound marketing plan, the company grew rapidly. In early 2013, the company was featured in a widely distributed entrepreneurial magazine. Later that year, the company was featured in Gourmet Desserts, a leading specialty food magazine. After the article appeared in Gourmet Desserts, sales exploded, and the company began receiving orders from all over the world. Because of the increased sales, Doc left his other job, followed shortly by Lyn. The company hired additional workers to meet demand. Unfortunately, the fast growth experienced by the company led to cash flow and capacity problems. The company is currently producing as many cakes as possible with the assets it owns, but demand for its cakes is still growing. Further, the company has been approached by a national supermarket chain with a proposal to put four of its cakes in all of the chain's stores, and a national restaurant chain has contacted the company about selling McGee cakes in its restaurants. The restaurant would sell the cakes without a brand name.
Ultimately, what action would you recommend the company undertake? Why?
Using fair value accounting for goodwill, under FAS 141R, determine the amount of Goodwill that "the acquiring company" enters on its balance sheet in the following situation: Oxford Corporation is acquiring the target Bickley, Inc. in a merger. Both..
Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break-even level for the project.
Current share price is $25, most recent dividend is $1.25, so dividend yield is 5%. Net income is $2 million. A $1.20 dividend is paid to the 1 million shareholders. Retained earnings is $200,000. Present value for a cash flow stream of $300 per year..
Yan Yan Corp. has a $10,000 par value bond outstanding with a coupon rate of 4.8 percent paid semiannually and 22 years to maturity. The yield to maturity on this bond is 4.2 percent. What is the price of the bond?
The current dividend for Woods Corp. is $4 per share. The firm is expected to increase its dividend by 15% during the next year and then decrease the growth rate of dividend payouts to a constant 10% per year thereafter. If the required return on the..
A 2,000 square foot house in Delaware costs $1725 to heat each winter with the existing oil burning furnace inside the home. For an investment of $5,000, a natural gas furnace can be installed, and the winter heating bill is estimated to decrease to ..
A firm has the following account balances. Which one of the following statements is correct concerning those balances? Accounts Receivable is a $900 source of cash. Long-term debt is a $5,800 source of cash.
Write the Physical Security Policy section of the Information Security Policy of the bank. Include the following: Security of the facilities: Physical entry controls, Security offices, rooms, and facilities Isolated delivery and loading areas Securit..
electrical utility is offering a security known as zero coupon bond for sale. the terms of the security are investors
For a given set of possible cash flows, as the required risk premium for a project increases, its price must decrease to entice investors to purchase the asset. (Hint: What is the price and expected return (premium) relation?) Eurodollars are dollar-..
You want to buy a car, and a local bank will lend you $30,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 11% with interest paid monthly. What will be the monthly loan payment? What will be the l..
ABC Corp. recently paid a dividend of $2. This dividend is expected to grow 10% per year for the next 3 years after which its dividend growth should normalize at a rate of 3% per annum. You estimate the company's cost of equity to be 10%. Given this,..
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