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Words 1706

Pages 7

HADM 564

April 16, 2012

Case 13: Southeastern Specialty, Inc.

Financial Risk (1, 2, 3, 4, & 6)

1. Is the return on the one-year T-bill risk free?

No, the return on the one-year T-bill is not risk free. Financial risk is related to the probability of earning a return less than expected and the larger the chance of earning a return far below that expected, the greater the amount of financial risk. Risk free assumes 100% probability that the investment will earn the total percent of return that is expected.

2. Calculate the expected rate of return on each of the five investment alternatives listed in Exhibit 13.1. Based solely on expected returns, which of the potential investments appear best?

Based on the expected returns, the potential investment that appears the best is 15% with S & P 500 Fund.

(Probability of Return 1 x Return 1) + (Probability of Return 2 x Rate 2) = Expected Rate of Return

1-Year T-Bill

(0.10 x .07) + (0.20 x .07) + (0.40 x .07) + (0.20 x .07) + (0.10 x .07) = .07 = 7%

Project A

(0.10 x [-.08]) + (0.20 x .02) + (0.40 x .14) + (0.20 x .25) + (0.10 x .33) = .135 = 13.5%

Project B

(0.10 x .18) + (0.20 x .23) + (0.40 x .07) + (0.20 x [-.03]) + (0.10 x .02) = .088 = 8.8%

S & P 500 Fund

(0.10 x [-.15]) + (0.20 x 0) + (0.40 x .15) + (0.20 x .30) + (0.10 x .45) = .15 = 15%

Equity in SSI

(0.10 x 0) + (0.20 x .05) + (0.40 x .10) + (0.20 x .15) + (0.10 x .20) = .10 = 10%

3. Now calculate the standard deviations and coefficients of variation of returns for the five alternatives. (Hint: Coefficient of variation of return is defined as the standard deviation divided by the expected rate of return. It is a standardized measure of risk that assesses risk per unit of return).

1-Year T-Bill

Variance = (0.10 x [.07-.07]2)+ (0.20 x [.07-.07]2) + (0.40 x [.07-.07]2) + (0.20 x…...

...TermPaperWarehouse.com - Free Term Papers, Essays and Research Documents The Research Paper Factory Join Search Browse Saved Papers Home Page » Business and Management Case 13: Southeastern Specialty, Inc. In: Business and Management Case 13: Southeastern Specialty, Inc. Elizabeth Vo HADM 564 April 16, 2012 Case 13: Southeastern Specialty, Inc. Financial Risk (1, 2, 3, 4, & 6) 1. Is the return on the one-year T-bill risk free? No, the return on the one-year T-bill is not risk free. Financial risk is related to the probability of earning a return less than expected and the larger the chance of earning a return far below that expected, the greater the amount of financial risk. Risk free assumes 100% probability that the investment will earn the total percent of return that is expected. 2. Calculate the expected rate of return on each of the five investment alternatives listed in Exhibit 13.1. Based solely on expected returns, which of the potential investments appear best? Based on the expected returns, the potential investment that appears the best is 15% with S & P 500 Fund. (Probability of Return 1 x Return 1) + (Probability of Return 2 x Rate 2) = Expected Rate of Return 1-Year T-Bill (0.10 x .07) + (0.20 x .07) + (0.40 x .07) + (0.20 x .07) + (0.10 x .07) = .07 = 7% Project A (0.10 x [-.08]) + (0.20 x .02) + (0.40 x .14) + (0.20 x .25) + (0.10 x .33) = .135 = 13.5% Project B (0.10 x .18) +......

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...Specialty Toys- Specialty Toys, Inc. sells a variety of new and innovative children’s toys. Management learned that the preholiday season is the best XXXX XX introduce a new toy, because many families use this time to look for new ideas for December holiday gifts. When Specialty discovers a new toy with good market potential, it chooses an October market entry date. In order to get toys in its stores by October, Specialty places one-time orders with its manufacturers in June or July of each year. Demand for children’s toys can be highly volatile. If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving Specialty stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. For the coming season, Specialty plans to introduce a new product called Weather Teddy. This variation of a talking teddy bear is made by a company in Taiwan. When a child presses Teddy’s hand, the bear begins to talk. A built-in barometer selects one of five responses that predict the weather conditions. The responses range from “It looks to be a very nice day! Have fun” to “I think it may......

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...Blades, Inc. Case, International Financial Management 1. The overall benefits from considering DFI in Thailand is maximizing profits and minimizing costs. Given the current situation, there are several things that would factor in a positive Direct Foreign Investment. First, Blades generates higher profit margin in Thailand. In addition, the cost of materials is significantly cheaper in Thailand. DFI in Thailand would diversify the risk. In other words, Blades would not be solely reliant on the U.S. economic conditions. Finally, Blades would increase its overall market share. 2. The main tradeoff is between the initial outlay required to invest and operating under uncertain economic conditions. If Blades were to engage in DFI now, the initial outlay will be low. However, the primary concern is that Thai consumers have not been affected by the unfavorable economic conditions, and the possibility that the economic conditions will not improve in the future. If this was to happen, Blades would pay a price. Nevertheless, if Blades waits one year and economy improves, the initial outlay required would be high, and there is a change there might be heavier competition. As a financial consultant for Blades, I would advise a analysis, as well as the series of other financial analysis by using various ratios, etc., prior to making this decision. Scenario analysis would be useful because we can see the possible outcomes and the changes for worst, best, and......

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...case 13: Southeastern Specialty, Inc. Elizabeth Vo HADM 564 April 16, 2012 Case 13: Southeastern Specialty, Inc. Financial Risk (1, 2, 3, 4, & 6) 1. Is the return on the one-year T-bill risk free? No, the return on the one-year T-bill is not risk free. Financial risk is related to the probability of earning a return less than expected and the larger the chance of earning a return far below that expected, the greater the amount of financial risk. Risk free assumes 100% probability that the investment will earn the total percent of return that is expected. 2. Calculate the expected rate of return on each of the five investment alternatives listed in Exhibit 13.1. Based solely on expected returns, which of the potential investments appear best? Based on the expected returns, the potential investment that appears the best is 15% with S & P 500 Fund. (Probability of Return 1 x Return 1) + (Probability of Return 2 x Rate 2) = Expected Rate of Return 1-Year T-Bill (0.10 x .07) + (0.20 x .07) + (0.40 x .07) + (0.20 x .07) + (0.10 x .07) = .07 = 7% Project A (0.10 x [-.08]) + (0.20 x .02) + (0.40 x .14) + (0.20 x .25) + (0.10 x .33) = .135 = 13.5% Project B (0.10 x .18) + (0.20 x .23) + (0.40 x .07) + (0.20 x [-.03]) + (0.10 x .02) = .088 = 8.8% S & P 500 Fund (0.10 x [-.15]) + (0.20 x 0) + (0.40 x .15) + (0.20 x .30) + (0.10 x .45) = .15 = 15% Equity in SSI (0.10 x 0) + (0.20 x .05) + (0.40 x .10) + (0.20 x .15) +......

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...MBA: 633 sTATISTICS FOR BUSINESS DECISION MAKING | Specialty Toys, Inc. | Case Problem: Group Assignment No. 1 | | March 4, 2010 | | [Managerial Report prepared to address issues and recommend and order quantity for the Weather Teddy product for Specialty Toys, Inc.] | Executive Summary Specialty Toys, Inc. is a manufacturer of new and innovative children’s toys which includes the Weather Teddy. The Weather Teddy has a built-in barometer that provides one of five standard responses about the weather when a child presses the teddy bear’s hand. The company recently reached out to our team to prepare a managerial report addressing, but not limited to, the following issues: normal probability distribution in relation to demand approximation, the probability of stock-outs for certain quantities and the projected profits associated with certain order quantities. The purpose of this managerial report is to address the concerns of the management team at Specialty Toys, Inc. and also to provide a recommended order quantity for the Weather Teddy, the probability of stock-outs related to specific order quantities, and the potential profits associated with certain order quantities. Specialty Toys Business Cycle The company sells a variety of toys throughout the year. However, Specialty Toys plans to release the Weather Teddy in October, before the holiday season is officially underway. Management has determined that this is the best time to release a holiday gift...

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...PROBLEM CASE 13: CHAPTER 5, PROBLEM CASE 11 CHAPTER 6 Julius R. Reed Grand Canyon University: Business 240: Ethical and Legal Issues in Business May 13, 2014 Chapter 5 – Problems and Problem Cases: Problem 13 Garelli Wong & Associates, Inc (GW) filed suit against Williams Nichols who was a former employer of their firm. GW claims that Nichols used confidential information that was in a database that the firm maintained. GW contended that Nichols was in breach of contract and referenced the Consumer Fraud and Abuse Act (CFAA). Based on their claims, the court will rule in favor of Nichols and dismiss the plaintiff’s case. The plaintiff failed to state a claim upon which relief could be granted. Specifically, Nichols did not meet any of the requirements outlined in the CFAA. Nichols did not transmit information or cause damage without authorization to a protected computer. Nichols was a former employee of CW: therefore he had authorization to the computer with the database. Nichols did not intentionally access the computer without authorization, or cause any type of loss to CW. Nichols was right to request dismissal of the plaintiff’s claim. Based on their claim, no relief would be granted. Nichols did not impair the integrity or availability of the information in the database. Any firm will risk the chance of a former employee leaking information to a new employee. CW should have been more specific in their contract for employee’s who had access to confidential......

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...Case 13-8 Accounting for a Loss Contingency for a Verdict Overturned on Appeal M International (“M”) and W Inc. (“W,” a competitor of M) have been engaged in longstanding litigation over a specific patent infringement matter. Below is a summary timeline of specific events that have taken place related to this matter: • • In May 2007, W filed a claim against M for patent infringement. For the year ended December 31, 2007, management of M determined that a loss for this matter was probable and represented that the estimate of loss was in the range of $15 million to $20 million, with $17 million being the most likely amount of loss within the range. A jury trial took place in September 2009. The jury reached a verdict on September 24, 2009, and a judgment was ordered in favor of W. The judgment required M to pay W $18.5 million. In November 2009, M filed a Notice of Appeal with the Court of Appeals. In December 2010, the Court of Appeals issued a ruling in favor of M’s appeal and reversed the lower court’s ruling on the matter. This meant that the Court of Appeals overturned the jury verdict and the $18.5 million judgment against M. On January 6, 2011, W filed a petition for a re-hearing before the same panel of appellate judges against the reversal of ruling by Court of Appeals. On February 10, 2011, the appellate judges declined the petition for a re-hearing. On February 28, 2011, management of M determined this matter was closed upon discussions with in-house legal......

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...Specialty Toys- Specialty Toys, Inc. sells a variety of new and innovative children’s toys. Management learned that the preholiday season is the best XXXX XX introduce a new toy, because many families use this time to look for new ideas for December holiday gifts. When Specialty discovers a new toy with good market potential, it chooses an October market entry date. In order to get toys in its stores by October, Specialty places one-time orders with its manufacturers in June or July of each year. Demand for children’s toys can be highly volatile. If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving Specialty stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales. For the coming season, Specialty plans to introduce a new product called Weather Teddy. This variation of a talking teddy bear is made by a company in Taiwan. When a child presses Teddy’s hand, the bear begins to talk. A built-in barometer selects one of five responses that predict the weather conditions. The responses range from “It looks to be a very nice day! Have fun” to “I think it may......

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...SCM880TT-International Purchasing and Supply Management Analysis of Southeastern University case study This case involves the purchase of a folding machine by the purchasing department of Southeastern University. The school’s laid down procedures, one of which is buying from an approved supplier amongst other things was not followed and now Heather, the buyer has a meeting with Glen her boss to explain ways to avoid problems of this kind in the future. The appropriate course of action would be for Heather to tell Glen, that she would meet with the staff involved with purchasing in general to remind them of and sensitize them to the importance of adhering to the university’s purchasing practices at all times so the integrity of the centralized purchasing system in place is not jeopardized or undermined. It also helps to save costs. Besides, transparency is also of utmost importance because it is a public institution that is funded by taxpayers. Also the processes involved with future purchases should be audited and vetted by a senior member of staff before the order is paced. In regards to the folding machine already bought, the best thing would be to go back to the supplier and negotiate a better deal comparable to the quotes she received from other suppliers. If that doesn’t work, a cancellation penalty might be another option so long as the final costs do not exceed the other quotes. So a cost-benefit analysis of the situation would be necessary. They may......

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...Case 13-08 overview M international (M) and W Inc (W) decided to enter a long term litigation, due to a patent rights violation. M being the demandant and W the respondent. Not enough information was provided in relation to the charges or the patent. To properly understand the events a chronological descripcion of the litigation is to be provided. Events: Problems to be addressed Is necessary to understand the proper and logical accounting literature to address the matter previously presented. The case it self provides a series of matters to be attends, these matters have to be address in accordance to the General Accepted Accounting Principles. Matters to be discussed: * The liability to be recorded by M financial statements, for the year-end December 31, 2007 * What adjustments should be done if any, for the year-ended December 31, 2009, financial statements; should the amount be recognized as a 2009 event or as a prior period adjustment. * When should M record a deduction of the previously recorded loss contingency Solution To understand the topic to be discussed is necessary to understand its basic components. FASB recognizes that companies are often involved in situations where uncertainty exists about whether an obligation will arise and an amount will be disbursed to fulfill or settle the obligation. This is known as a Contingency in the Accounting world. What is a contingency? ASC 450-10-20 defines it as “An existing condition...

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...Case Analysis – Specialty Toys 1. Senior sales forecaster predicted and expected demand of 20,000 units with .95 probability that demand would be between 10,000 and 30,000 units. P (10,000 < x< 30,000) = .95 (30,000-20,000)/1.96 = 5,102 X = the demand of Weather Teddy Mean µ = 20,000 Standard Deviation α = 5,102 The normal distribution of the demand for the Weather Teddy is represented in the graph below. This is based off of the forecast of previous selling history of other similar toys. The forecast shows that the demand for the Weather Teddy will be at 20,000 units, but with a probability of .95 of selling anywhere between 10k to 20k units. Therefore, with the information given the standard deviation of this forecast is at 5,102. 2. With various order quantities suggested by members of the management team, it would be wise to compute the probability of a stock-out for each of the order quantities suggested. The probability of a stock-out is the inverse of the probability that the quantity sold is less than or equal to the amount purchased by the company. 1st Formula used: z = (x - µ) / σ The probability of a stock out is calculated by subtracting the probability found in the chart from 1. Suggested Quantity to Order | Probability of a Stock-Out | 15,000 | 83.65% | 18,000 | 65.17% | 24,000 | 21.77% | 28,000 | 5.82% | 3. Based on the various order quantities suggested by members of the management team, a simple profit analysis...

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...CASO: SOUTHEASTERN UNIVERSITY Datos Relevantes Políticas de la Universidad (es necesario la aprobación del área de compras antes de adquirir un compromiso con los proveedores) pues ya tiene establecidos procesos. La universidad es considerada una de las más grandes del estado. Posee organigrama del departamento de compras. Funciones del departamento de compras (cada requerimiento que llegue al área deberá sellar con fecha - hora y verificar la firma quien autoriza en algunos casos el área de finanzas apoyara con la cuenta se apruebe, verificaría los impuestos y el estatus del proveedor y clasificación del producto.) El departamento de adquisiciones tenía tres grupos de compradores (cada uno manejaba 20 requisiciones por día). El departamento de compras posee una base de datos grande (1200 proveedores) los cuales eran evaluados cada cierto periodo de años. Dispone de un formulario de cotizaciones (RFQ) donde se detallaba la descripción del producto, cantidad, punto FOB y términos de pago. El volumen de compras ascendía a 75 millones de dólares en bienes y servicios cada año. Objetivo del departamento de compras es conseguir mayores ahorros en costos.Hay cierta cantidad de casos con respecto a compras hechas por parte de otras áreas que no cumplen con los procedimientos para las compras. ANÁLISIS DE LA SUTHEASTERN UNIVERSITY III. CONCLUSIONES 1. Ejecutar el Plan de Acción definido en el Análisis Causa – Efecto para el área de Compras. 2. Debemos de iniciar...

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...Heather Sloman, buyer in the purchasing department of southeastern University, was preparing for a meeting with her boss, Glen Meredith, for later that day. Two days earlier, on April 6th, Glen had received a phone call from Walter Charbonneau, manager of the university registrar’s office. Heather was surprised to learn from Glen that Walter had just bought a new piece of equipment for his department without following standard university purchasing policies. Glen asked Heather to look into the situation and get back to him with recommendation. Purchasing Department Southeastern University was one of the largest universities in the state, with total enrolment of more than 25,000 graduate and undergraduate students and approximately 3,500 staff. There were 12 faculties at the university, over 20 continuing education diploma and certificate programs and three affiliated colleges. Purchasing was centralized, and the purchasing director, Blake Hyatt, reported to the university’s vice president of administration. The purchasing department was responsible for negotiating with suppliers, signing contracts with suppliers, and supervising the execution of contracts. Small-value purchases those less than $100 could be handled out of petty cash. The purchase department had also recently introduced a purchasing card, which could be used to acquire legible goods and services with a value of less than $1000. The purchasing process began when a purchase......

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...Specialty Toys Case Study 1. The mean is 20,000 units and there is a 95% probability that demand will be between 10, 000 and 30,000 units. This means there is a .025% chance that the demand will be outside of 10,000 and 30,000. Using the chart, we find that z=-1.96. Using the following calculation, we find: z= x- μ σ -1.96 = 10,000 – 20,000 σ σ=5102 Standard deviation σ = 5,102 μ = 20,000 mean 2. Stock outs were calculated by the four management numbers. Equation is: z = (x – μ)/ σ 15,000: Z = (15,000-20,000)/5102 z = -0.98 Then, reference the cumulative probabilities for standard deviation table in the beginning of the book to identify what -0.98 represents, which is .1635. Since stock outs are any quantity greater than what management suggested, they need to be subtracted from 1. 1 - .1635 = .8365 which = 83.65% Same logic/steps for the rest of the values: 18,000 24,000 28,000 Z = (18,000-20,000)/5102 z=(24,000-20,000)/5102 z=(28,000-20,000)/5102 z = -.39 z=.78 z= 1.57 1 - .3483 = .6517 1 - .7823 = .2177 ...

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