QRB501 Case 5-2 and 6-2

 

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QRB501 Case 5-2 and 6-2

Case 5-2

INSTRUCTIONS: Read the case in the textbook. As a team, answer the questions in this spreadsheet, then save and submit the assignment as one Microsoft® Excel® attachment. Also, submit a 1-paragraph Microsoft® Word document explaining any issues or successes you had in answering these questions.

Refer to and use the following abbreviations for the problems below:

• R = Royalty Payment
• CT = Artist Credit Total
• SV = Share Value
• CV = Credit Value
• RP = Retail Price
• PD= Packaging Deduction
• R%=Royalty Percentage of Suggested Retail Price minus packaging

1. Ziam wants to know how much his royalty will be for a song he has written. How will it be calculated? Write the steps or the formulas that will be used to calculate his royalty payment.

2. Ziam has written a popular song titled “Going There,” which has been recorded by a well-known performer. He recently received a royalty check for $7,000. If Ziam gets a 0.5 share of the royalties and the credit value is $3.50, what was the credit total that his song earned? Write out the problem in the form of an equation and solve it.

3. Ziam quickly published another song, “Take Me There,” that is played even more often than “Going There.” If his first song earns 4,000 credits and his second song earns 6,000 credits, what will the royalty payment be from the two songs if the credit value remains at $3.50?

4. Ziam is considering an offer to perform his own songs on a CD to be titled “Waiting There.” In the past, he has written but not performed his music. If Ziam’s royalty is 0.12 of the suggested retail price of $15.00, but 0.25 of the retail price is deducted for packaging before Ziam’s royalty is calculated, how much will he receive for sale of the CD? Write your answer in the form of an equation and solve it.

Case 6-2

INSTRUCTIONS: Read the case in the textbook. As a team, answer the questions in this spreadsheet, then save and submit the assignment as one Microsoft® Excel® attachment. Also, submit a 1-paragraph Microsoft®Word document explaining any issues or successes you had in answering these questions.

Refer to and use the following abbreviations for the problems below:

• PS = Public Subscribers
• AD = Advertisers
• TC = Telephone Customers
• ISP = Internet Customers
• TOT = Total Customers

1. What percentage of the total does each of the four customer groups represent? Round to the nearest hundredth of a percent.

2. Minh’s data shows that on average only 4.6% of customers were purchasing complementary services available within Media Systems. By using his company’s services, Minh was projecting that these percentages would triple across all user groups within 1 year. a) How many customers would that equate to in total for each group? b) What would be the difference compared to current levels?

3. Customer complaint data showed that within the last year, complaints by category were as follows: publication subscribers, 1,174; advertisers, 423; telephone service customers, 4,411; and ISP customers 823. a) What percentage of customers (round to two decimal places)complained within the last year in each category? b) If the CRM software were able to reduce complaints by 50% each year over the next 2 years, how many complaints would there be by category at the end of that time period? And c) What would the number of complaints at the end of 2 years represent on a percentage basis?

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Multiple Choice Answers
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Question 1 
The balance in the Accumulated Depreciation account represents the
Answer cash fund to be used to replace plant assets. 
amount to be deducted from the cost of the plant asset to arrive at its fair market value. 
amount charged to expense in the current period. 
amount charged to expense since the acquisition of the plant asset.

Question 2 
Which of the following would not be included in the Equipment account?
Answer
Installation costs 
Freight costs 
Cost of trial runs 
Electricity used by the machine 

Question 3 
Interest may be included in the acquisition cost of a plant asset
Answer
during the construction period of a self-constructed asset. 
if the asset is purchased on credit. 
if the asset acquisition is financed by a long-term note payable. 
if it is a part of a lump-sum purchase. 

Question 4 
Swanson Company bought a machine on January 1, 2007. The machine cost $72,000 and had an expected salvage value of $12,000. The life of the machine was estimated to be 5 years.
Reference: Ref 9-2
The depreciation expense using the straight-line method of depreciation is
Answer $20,000 
$14,400 
$12,000 
none of the above 

Question 5 
Bates Company purchased equipment on January 1, 2006, at a total invoice cost of $600,000. The equipment has an estimated salvage value of $15,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used?
Answer $120,000 
$240,000 
$117,000 
$234,000 

Question 6 
The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that
Answer
is used for tax purposes. 
must be used for financial statement purposes. 
is required by the SEC. 
expenses an asset over a single year because capital acquisitions must be expensed in the year purchased. 

Question 7 
If disposal of a plant asset occurs during the year, depreciation is
Answer
not recorded for the year. 
recorded for the whole year. 
recorded for the fraction of the year to the date of the disposal. 
not recorded if the asset is scrapped. 

Question 8 
Copyrights are granted by the federal government
Answer for the life of the creator or 70 years, whichever is longer. 
for the life of the creator plus 70 years. 
for the life of the creator or 70 years, whichever is shorter. 
and therefore cannot be amortized. 

Question 9 
Jarman’s Courier Service recorded a loss of $3,000 when it sold a van that originally cost $28,000 for $5,000. Accumulated depreciation on the van must have been
Answer $26,000 
$8,000 
$25,000 
$20,000 

Question 10 
The Land account would include all of the following costs except
Answer
drainage costs. 
the cost of building a fence. 
commissions paid to real estate agents. 
the cost of tearing down a building. 

Question 11 
A plant asset was purchased on January 1 for $27,000 with an estimated salvage value of $3,000 at the end of
its useful life. The current year’s Depreciation Expense is $3,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $15,000. The remaining useful life of the plant asset is

Answer 10 years. 
8 years. 
5 years. 
3 years. 

Question 12 
The term applied to the periodic expiration of a plant asset’s cost is
Answer
amortization. 
depletion. 
depreciation. 
cost expiration. 

Question 13 
Cost allocation of an intangible asset is referred to as
Answer amortization. 
depreciation. 
accretion. 
capitalization.

Question 14 
On November 1, 2006, Dark Company places a new asset into service. The cost of the asset is $9,000 with an estimated 5-year life and $1,000 salvage value at the end of its useful life. What is the depreciation expense for 2007 if Dark Company uses the straight-line method of depreciation?
Answer $400 
$1,600 
$266.67 
$900 

Question 15 
A company has the following assets:
Buildings and Equipment, less accumulated depreciation of $2,500,000 $15,000,000 
Copyrights 1,200,000 
Patents 5,000,000 
Land 6,000,000 
The total amount reported under Property, Plant, and Equipment would be
Answer $27,200,000. 
$21,000,000.
$26,000,000.
$22,200,000.

Question 16 
Vickers Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $36,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $3,000. What is the depreciation cost per unit?
Answer
$3.30 
$3.60 
$0.33 
$0.36

Question 17 
A gain or loss on disposal of a plant asset is determined by comparing the
Answer replacement cost of the asset with the asset’s original cost. 
book value of the asset with the asset’s original cost. 
original cost of the asset with the proceeds received from its sale. 
book value of the asset with the proceeds received from its sale. 

Question 18 
Management should select the depreciation method that
Answer is easiest to apply. 
best measures the plant asset’s market value over its useful life. 
best measures the plant asset’s contribution to revenue over its useful life. 
has been used most often in the past by the company. 

Question 19 
A computer company has $2,500,000 in research and development costs. Before accounting for these costs, the net income of the company is $3,000,000. What is the amount of net income or loss after these research and development costs are accounted for?
Answer $500,000 loss 
$2,500,000 net income 
$500,000 net income 
Cannot be determined from the information provided 

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Multiple Choice Answers
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Question 1 
A bond sells at a discount if:
a. The required return is LESS THAN the coupon rate on the bond.
b. The required return is MORE THAN the coupon rate of the bond
c. The required return is the SAME AS the coupon rate of the bond
d. The required return is LESS THAN the Federal Reserve Discount Rate

Question 2 
The typical face (par) value of a corporate bond is:
a.$ 100
b.$ 1,000
c.$ 500
d.$ 10,000

Question 3 
The amount which a bondholder receives when a bond matures is:
a. the Yield to Maturity (YTM)
b. the Coupon Rate
c. the Face Amount of the Bond (Par Value)
d. the Current Yield (CY)

Question 4
The DIRTY PRICE paid for a corporate bond is the:
a. Current Market Price LESS Accrued Interest
b. SAME as the CLEAN PRICE in most circumstances
c. Current Market Price PLUS Accrued Interest
d. Present VLAUE of all coupon payments AND face value

Question 5
The Coupon RATE on a corporate bond is set out in the bond contract and is usually expressed as:
a. A percentage of the Bond’s PAR VALUE
b. A Bond’s Yield to Maturity (YTM)
c. The MONTHLY payment received by Bondholders
d. The AMOUNT of the periodic interest payment on a Bond

Question 6
The CONTRACT between the company and its bondholders is called a(n);
a. Subordinated Debenture
b. Loan Agreement
c. Indenture
d. Bond Trust Agreement

Question 7
A bond which pays ONLY ITS FACE (PAR) VALUE at maturity is called a:
a. JUNK BOND
b. ZERO COUPON BOND
c.30 year U.S.Treasury Bond
d. A CONSOL

Question 8
A dividend pattern of “phenomenal” growth for a short period followed by constant growth indefinitely is called:
a. Subnormal Growth
b. Supernormal Growth
c. Standard dividend policy
d. The Dividend Growth Model

Question 9
Under the Dividend Growth Model (DGM) of security valuation, the two components of the return to the holder of a share of stock are the:
a. Dividends and Capital Gains (GROWTH in stock price)
b. Supernormal (uneven) dividend growth rate and terminal value of the stock
c. Constant Dividend Growth and Capital Gains
d. Present Value AND Future Value

Question 10
The current market price of a share of common stock is equal to the:
a. PRESENT VALUE of the future dividends it is expected to generate.
b. FUTURE VALUE of all dividends PLUS the price for which the stock is RESOLD
c. PRESENT VALUE of all future dividends PLUS the PRSENT VALUE of the expected future selling price of the stock
d. None of the above

Question 11
Which of the following is an IMPORTANT ASSUMPTION in the Dividend Growth Model of Stock valuation?
a. The Dividend Growth Rate is CONSTANT
b. The Dividend Growth Rate is GREATER THAN the required rate of return
c. The company’s Dividend policy will PROBABLY CHANGE in the future
d. The REQUIRED RATE of RETURN is VARIABLE.

Question 12
The stock market consists of a primary and a secondary market. The term “SECONDARY MARKET” means:
a. The market in which NEW SHARES are originally sold to investor
s

b. The market in which IPOs are sold
c. The market in which PREVIOUSLY SOLD SHARES are traded AMONG investors
d. The electronic market known as the NASDAQ

Question 13
The Dividend Growth Model is used to:
a. Estimate the CURRENT MARKET PRICE of stock which is likely to receive dividends in the future.
b. Estimate the REQUIRED RATE OF RETURN on stock if we know the current price, dividend and projected growth rate
c. Estimate the REQUIRED GROWTH RATE on stock if we know the current price, the required return, and the projected dividend
d. All of the above

Question 14
A corporate bond with a $1,000 face value pays $50 interest EVERY SIX MONTHS, and will mature in TEN YEARS. The bond has an ANNUAL Yield to Maturity (YTM) of 9%. What is the current price of the bond?
 a. $634.86
 b. $1,065.04
 c. $1,078.23
 d. $1,094.56

Question 15
Ngata Corp issued 13-year bonds 3 years ago with a 9% coupon rate. The bonds make semi-annual payments. If the bonds are currently selling for 97% of par, what is the Yield to Maturity (YTM) to current purchasers of the bonds?
a.8.96%
b.6.76%
c.12.44%
d.9.48%

Question 16 
You intend to purchase a bond with a 10% COUPON and a CLEAN price of $920.00. The next SEMI-ANNUAL interest payment is due in 3 months. What is the Invoice (TOTAL) Price of the Bond? (What is the FULL amount you must pay to buy the Bond TODAY?
a. $945.00
b. $999.00
c. $ 1015.00
d. $975.00
   
Question 17 
XYZ Inc. PROPOSES to issue 15 year ZERO COUPON Bonds to fund a large equipment purchase. If the required rate of return on the Bonds is 8.4%, COMPOUNDED SEMI-ANNUALLY, what will the bonds sell for TODAY?
a. $184.20
b. $233.80
c. $291.05
d. $324.80
   
Question 18
The Johnson Company has decided to fund a large expansion project by issuing Preferred Stock with a PERPETUAL DIVIDEND of $ 10 per share. If the required rate of return on investments of similar risk is 25%, what is the stock’s current PER SHARE market value?
a. $50
b. $ 40
c. $80
d. $100

Question 19 
Keenan Corp expects to maintain a constant dividend growth rate of 2.8% indefinitely. If the company has a DIVIDEND YIELD of 5.1%, what is the required return on the corporation’s stock?
a. 7.3%
b. 7.9%
c. 11.5%
d. 8.2%

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Multiple Choice Answers
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Richard Petty and John Cacioppo’s ________, an influential model of attitude formation and change, describes how consumers make evaluations in both low- and high-involvement circumstances.
A. elaboration likelihood model
B. stimulus-response model
C. associative network memory model
D. introspective model
E. expectancy-value model

As Rita Skeeta scans the yellow pages section of her phone book looking for a florist, she sees several other products and services advertised. Though interesting on first glance, she quickly returns to her primary task of finding a florist. The items that distracted her from her initial search were most likely stored in which of the following types of memory?
A. Long-term memory
B. Subliminal memory
C. Middle memory
D. Subconscious memory
E. Short-term memory

When purchasing disposable surgical gowns, Mercy Hospital’s vice president of purchasing analyzes whether the hospital should buy disposable gowns or reusable gowns. If the findings favor disposable gowns, then the operating-room administrator compares various competitors’ products and prices and makes a choice. Surgeons influence the decision retroactively by reporting their satisfaction with the particular brand. In this situation, the surgeons perform the role of the ________.
A. decider
B. user
C. initiator
D. buyer
E. gatekeeper

Which of the following is a challenge in which business marketers differ from the consumer marketers?
A. identifying new opportunities for organic business growth
B. geographically concentrated buyers
C. competing and growing in global markets, particularly China
D. calculating better marketing performance and accountability metrics
E. understanding deep customer needs in new ways

Sigmund Freud assumed that the psychological forces shaping people’s behavior are largely unconscious, and that people cannot fully understand their motivations.
A. true
B. false
C. who?
Organizational buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.
A. true
B. false
C. I don’t know. My hamster ate my notes.

________ occurs when customers are given a perspective or point of view that allows the firm to “put its best foot forward.”
A. Gate keeping
B. Commoditization
C. Framing
D. Bartering
E. Rebuying

According to Maslow’s hierarchy of needs model, recognition, self-esteem, and status would constitute a person’s social needs.
A. true
B. false
C. isn’t he the guy with the pyramid?

Groups that have an indirect influence on a person’s attitude or behavior can be a part of his/her reference groups.
A. true
B. false
C. kind of snobby, huh?

Initiators are those who authorize the proposed action of deciders or buyers.
A. true
B. false
C. bossy, huh?

Fidel writes a weekly column in his school’s newspaper about movies he has seen, books he has read, and concerts he has attended. His column provides information and opinions. Feedback from his fellow students is positive, and they are appreciative of the advice that is given. Which of the following would be the most apt description of the role played by Fidel?
A. adapter
B. silent majority
C. protector
D. opinion leader
E. protest or
________ refers to the process in which information gets out of memory.
A. Memory decoding
B. Memory classification
C. Memory encoding
D. Memorization
E. Memory retrieval

Brands that meet consumers’ initial buying criteria are called the ________.
A. awareness set
B. decision set
C. consideration set
D. total set
E. choice set

The new, more st
rategically oriented purchasing departments have a mission. Which of the following most accurately describes that mission?

A. Approach every purchasing opportunity as means to create interdependency.
B. Seek the best value from fewer and better suppliers.
C. Always put the peanut butter next to the bread.
D. Abandon all strategies except for systems selling and buying.
E. Make the most profit possible and remain independent of entanglements.

Companies are increasingly reducing the number of suppliers they utilize, and there is a trend toward single sourcing.
A. true
B. false
C. I don’t know.

A new-task buy class decision begins with which of the following steps?
A. problem recognition
B. proposal solicitation
C. general need description
D. product specification
E. supplier search

In a ________ purchasing situation, the buyer wants to make some change to existing product specifications, prices, delivery requirements, or other terms.
A. modified rebuy
B. straight rebuy
C. regular buy
D. new task
E. new rebuy

The buying process starts when the buyer decides to or actually enters a store or service provider’s facility.
A. true
B. false
C. which store?

Brand personality is the specific mix of human traits that may be attributed to a particular brand.. A. true
B. false
C. for Coke yes, for Pepsi, no

The buying process begins when someone places an order with a sales representative.
A. true
B. false
C. I don’t know.

With respect to consumer decision making, the ________ is the set of strong contenders from which one will be chosen as a supplier of a good or service.
A. consideration set
B. choice set
C. awareness set
D. decision set
E. total set

People are more likely to notice stimuli whose deviations are large in relation to the normal size of the stimuli.
A. true
B. false
C. I don’t know but the answer’s really small or really big.

________ teaches marketers that they can build demand for a product by associating it with strong drives, using motivating cues, and providing positive reinforcement.
A. Psychological theory
B. Learning theory
C. Demographic theory
D. Demand theory
E. Economic theory

Ultimately, the amount of steel sold to General Motors depends on the consumers’ demand for GM cars and trucks. From the standpoint of the steel manufacturer, which of the following demand forms is most pertinent?
A. static demand
B. derived demand
C. geographic demand
D. relational demand
E. inelastic demand

A question that respondents can answer in an almost unlimited number of ways is called a ________.
A. stupid question
B. structured question
C. closed-end question
D. dichotomous question
E. completely unstructured question

Jaime collected primary data when he distributed a survey to dorm residents to discover their attitudes and opinions on campus life.
A. true
B. false
C. I don’t know. Does it really manner? I mean, who cares about dorm residents?

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Multiple Choice Answers
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Which of the following statements accurately describes what demographers are calling the “boom-boom effect”?
A. consumers are demanding more “bang for their buck”
B. products that appeal to 21-year-olds also appeal to baby boomers
C. Baby boomers still rule the marketplace
D. companies must gain success quickly
E. Generation Y and their concern about environmental issues will dominate the market in the future

General Motors, a leading American multinational automaker, sells cars for every purpose, purse, and personality. This is an example of ________ marketing.
 A. car 
 B. undifferentiated 
 C. niche 
 D. differentiated 
 E. concentrated The key to attracting potential users, or even possibly nonusers, is ________.

The key to attracting potential users, or even possibly nonusers, is ________.
A. increasing advertising expenditures
B. offering financial incentives for first-time use
C. understanding the reasons they are not using
D. developing a new product that better meets their needs
E. a matter of good grooming

To be useful, market segments must be measurable.
A. true
B. false
C. What would we use? A really big tape measure?

Which of the following statements is true about the five forces identified by Michael Porter, that determine the intrinsic long-run attractiveness of a market or market segment?
A. A segment is attractive if it already contains numerous, strong, or aggressive competitors.
B. A segment is unattractive if the company’s suppliers are unable to raise prices or reduce quantity supplied.
C. A segment is unattractive if buyers possess strong or growing bargaining power.
D. A segment is attractive when there are actual or potential substitutes for the product.
E. The most attractive segment is one in which entry barriers are low and exit barriers are high.

Hard-core loyals can show the firm which brands are most competitive with its own.
A. true
B. false
C. only if they have the company logo branded on their body and name their first born child after the company (seriously, do you know how many kids are running around with the name Harley?)

People in the same demographic group generally exhibit similar psycho graphic profiles.
A. true
B. false
C. Do people really start to look like their pets?

Those who favor localized marketing see national advertising as wasteful because ________.
A. it drives up manufacturing and marketing costs by reducing economies of scale.
B. it gets too up close and personal with consumers.
C. it sends conflicting marketing messages.
D. it fails to address local needs.
E. they have good taste.

The sale of turkeys in the United States is highest in mid-to late November, as people buy turkeys to serve at Thanksgiving. Grocery stores who specifically advertise turkeys at this time of year are segmenting on the basis of ________.
A. user status
B. benefits
C. buyer-readiness stage
D. demographics
E. occasion

Members of the same generational cohort share t
he same major cultural, political, and economic experiences and have similar outlooks and values.

A. true
B. false
C. Don’t know. Don’t care. Gonna flunk.

When Nike attempts to get close to its customers at the local level by sponsoring local school teams and providing shoes, equipment, and clothing to many of them, Nike is using which of the following marketing formats?
A. guerrilla marketing
B. grassroots marketing
C. affiliate marketing
D. affinity marketing
E. differentiated marketing

Psycho graphics is the science of using psychology and demographics to better understand consumers.
A. true
B. false
C. Psycho-what?

Mothers-to-be are potential users who will turn into heavy users of infant products and services. By targeting mothers-to-be as future heavy users, producers of these products and services are segmenting consumers on the basis of ________.
A. buyer-readiness stage
B. benefits
C. loyalty status
D. user status
E. sheer tiredness

A segment is attractive when there are actual or potential substitutes for the product.
A. true
B. false
C. butter/margarine; salmon/cod; chips/pretzels; Is it dinner time yet?

Dennis requests his father to buy him a Play Station ® for his birthday. With respect to consumer decision roles, which role is Dennis currently playing?A. gatekeeper
B. initiator
C. greedy
D. buyer
E. influence

Which of the following terms can be defined as “the shared experiences, stories, beliefs, and norms that characterize an organization”?
A. customer relationships
B. a business mission
C. corporate culture
D. organizational dynamics
E. an ethical/value statement

The marketing plan, the central instrument for directing and coordinating the marketing effort, operates at ________ levels.
A. corporate and operational
B. functional and operational
C. corporate and division
D. customer and expenditure
E. strategic and tactical

Unlike its competitors in the online air travel industry, ACME provides its customers with a greater variety of services such as cruise reservations, package tours, hotel bookings, and car rentals. This is an example of a(n) ________ strategy.
A. focus
B. diversification
C. differentiation
D. overall cost leadership
E. promotional

Another way to describe a supply chain, where companies partner with specific suppliers and distributors to ensure a smooth functioning of the system, is to call it a ________.
A. teamwork group
B. value exploration
C. domestic power center
D. horizontal integration
E. value delivery network

When a customer places an order at Book Box.com, the company processes the customer’s payment information, sends the order to the nearest warehouse, and ships the order via FedEx. This is best described as the ________.
A. customer relationship management process
B. new-offering realization process
C. market-sensing process
D. customer acquisition process
E. fulfillment management process

In the ________ category of buyer-supplier relationship, although bonded by a close, cooperative relationship, the seller adapts to meet the customer’s needs without expecting much adaptation or change on the part of the customer in exchange.
A. cooperative system
B. customer is king
C. contractual transaction
D. mutually exclusive
E. collaborative

Which of the following products is most likely to be characterized by low involvement but significant brand difference?
A. packet of salt
B. furniture
C. a milk carton
D. digital cameras
E. toothpastes

The purchasing department buys office supplies on a routine basis from a pre-approved list of suppliers. This type of purchase is classified as a ________.
A. straight rebuy
B. secondary purchase
C. modified rebuy
D. procure-to-pay
E. new task

In which of the following is a person performing the role of an approve ?
A. Dana authorizes the actions of the deciders and buyers in LKG.
B. Dan decides on the product requirements and makes the final choice of suppliers.
C. Liam heads the Tech team at LKG and provides information for evaluating the possible alternatives.
D. LKG gets many calls from potential suppliers, and it is Leah’s job to weed out the good prospects and refer them to others in LKG.
E. Frederica has the authority to pick out the supplier and negotiate the terms of purchase.

Richard Petty and John Cacioppo’s ________, an influential model of attitude formation and change, describes how consumers make evaluations in both low- and high-involvement circumstances.
A. elaboration likelihood model
B. stimulus-response model
C. associative network memory model
D. introspective model
E. expectancy-value model

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Multiple Choice Answers
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Profit rate tends to decrease over the life of the retained customer due to increased purchases, referrals, price premiums, and increased operating costs to service.
A. true
B. false
C. Only on Tuesdays

Customer-perceived value is the perceived monetary value of all the purchases a customer makes on an annual basis.
A. true
B. false
C. I don’t know.

A ________ is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer.
A. market nicher
B. prospector
C. pioneer customer
D. profitable customer
E. market challenger

Which of the following is the best method of recovering customer goodwill?
A. defining and measuring the customer retention rate
B. contacting the complaining customer as quickly as possible
C. free cookies
D. sending service people to conduct door-to-door surveys
E. identifying prospective customers from the customer database

The value proposition is stated in the price of a product and readily recognized by the average consumer.
A. true
B. false
C. I don’t know.

In Walt Disney’s Magic Kingdom, customers can visit a fairy kingdom, a pirate ship, or even a haunted house. Disney is marketing a(n) ________.
A. o
rganization

B. experience
C. good
D. service
E. event

________ goods constitute the bulk of most countries’ production and marketing efforts.
A. Impulse
B. Physical
C. Luxury
D. Intangible
E. Durable

The marketing concept holds that ________.
A. a new product will not be successful unless it is priced, distributed, and sold properly
B. a better product will by itself lead people to buy it without much effort from the sellers
C. consumers and businesses, if left alone, won’t buy enough of the organization’s products
D. customers who are coaxed into buying a product will most likely buy it again
E. a firm should find the right products for its customers, and not the right customers for its products

The value of an offering is described as ________.
A. the sum of the tangible and intangible benefits and costs to customers
B. the price consumers are charged for a product
C. the cost of manufacturing a product
D. the degree to which consumer demand for a product is positive
E. the intangible benefits gained from a product

Rick Johnson trains his company’s sales force to go after the consumer. He repeatedly asks his team to bear in mind the essential fact that it is the sales team’s responsibility to rouse the consumer’s interest and make him feel that he needs the product. A true salesman is one who can convert an indifferent consumer walking into the store into a new customer. Johnson believes in the ________ concept.
A. production
B. product
C. selling
D. social responsibility
E. marketing

An attractive niche consists of customers having a distinct set of needs.
A. true
B. false
C. Needy is always unattractive.

If a marketer is seeking to segment a business market, which of the following variables is generally felt to be the most important?
A. situational factors
B. personal characteristics
C. purchasing approaches
D. operating variables
E. demographic variables

If your assignment was to create a value proposition and product-price positioning strategy for each segment, based on the segment’s unique customer needs and characteristics, you would be in which of the following steps of the segmentation process?
A. needs-based segmentation
B. segment “acid-test”
C. segment identification
D. segment attractiveness
E. segment positioning

If a marketing manager segments the market into culture-oriented, sports-oriented, or outdoor-oriented groups, he or she is segmenting on the basis of ________.
A. psycho graphic lifestyle
B. loyalty status
C. behavioral occasions
D. user status
E. readiness stage

Newlyweds in the United States buy more in the first six months than an established household does in five years. Newlyweds are an example of a(n) ________ segment.
A. life stage
B. behavior
C. age
D. income
E. user status

Hilton Hotels customizes rooms and lobbies according to location. Northeastern hotels are sleeker and more cosmopolitan. Southwestern hotels are more rustic. This is an example of ________ segmentation.
A. demographic
B. behavioral
C. geographic
D. cultural
E. psycho graphic

When LaToya goes shopping for clothes, she goes into every store in the mall looking for the best deal. She is very price conscious. On the basis of loyalty status, LaToya can be described as ________.
A. an antiloyal
B. a switcher
C. cheap
D. a shifting loyal
E. a split loyal

The most attractive segment is one in which entry barriers are low and exit barriers are high.
A. true
B. false
C. I though the attractive ones were after you’d had three beers.

If a buyer is loyal to two or three different brands of soap, this buyer’s loyalty status can be described as being among the ________.
A. switchers
B. shifting loyals
C. anti loyals
D. split loyals
E. hard-core loyals

Question 45 of 1001.0 Points
Which of the following statements about market segmentation is true?
A. It is a process of evaluating each segment’s attractiveness and selecting one or more to enter.
B. It is a process of identifying and profiling distinct groups of buyers who differ in their needs and wants.
C. It is the quality of how marketers go to market with the goal of optimizing their spending to achieve good results.
D. It’s dull.
E. It is a process of creating an image or identity of the product in the minds of the target market.

Fergus always buys ACME dog food for his dog because he believes that it is the best value for the nutritional content. Fergus’ loyalty status is best described as ________.
A. consistent loyal
B. shifting loyal
C. split loyal
D. switcher
E. hard-core loyal

If a marketing manager observes that his or her market shows no natural segments and consumers seem to have roughly the same preferences, the marketing manager will most likely be faced with a ________ preferences pattern.
A. clustered
B. heterogeneous
C. homogeneous
D. diffused
E. scattered

A local service company has decided to segment its market based on occupation; therefore, it has chosen a form of demographic segmentation for its approach.
A. true
B. false
C. chocolate

If a marketer decides to segment a market based on neighborhoods, the marketer will have chosen the ________ method of segmentation.
A. behavioral
B. cultural
C. psycho graphic
D. geographic
E. demographic

With respect to loyalty status, if a consumer is loyal to two or three brands, he or she is called shifting loyal.
A. true
B. false
C. Diet Pepsi, Diet Coke, Coke Zero, DietRite, Diet RC, Diet Dr. Pepper

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Multiple Choice Answers
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Question 1
Financial capital does not include:
 A. stock. 
 B. bonds. 
 C. preferred stock. 
 D. working capital.

Question 2 
The overall weighted average cost of capital is used instead of costs for specific sources of funds because:
 A. use of the cost for specific sources of capital would make investment decisions inconsisten
t. 

 B. a project with the highest return would always be accepted under the specific cost criteria. 
 C. investments funded by low cost debt would have an advantage over other investments. 
 D. Both A and C

Question 3 
Debreu Beverages has an optimal capital structure that is 50% common equity, 40% debt, and 10% preferred stock. Debreu’s pretax cost of equity is 12%. It’s pretax cost of preferred equity is 7%, and it’s pretax cost of debt is also 7%. If the corporate tax rate is 35%, what is the weighed average cost of capital?
 A. Between 7% and 8% 
 B. Between 8% and 9%
 C. Between 9% and 10% 
 D. Between 10% and 12%

Question 4 
For a firm paying 7% for new debt, the higher the firm’s tax rate:
 A. the higher the after-tax cost of debt. 
 B. the lower the after-tax cost of debt. 
 C. after-tax cost is unchanged. 
 D. Not enough information to judge.

Question 5 
If a firm’s bonds are currently yielding 8% in the marketplace, why would the firm’s cost of debt be lower?
 A. Interest rates have changed. 
 B. Additional debt can be issued more cheaply than the original debt. 
 C. There should be no difference; cost of debt is the same as the bond’s market yield. 
 D. Interest is tax-deductible.

Question 6 
A firm’s cost of financing, in an overall sense, is equal to its:
 A. weighted average cost of capital. 
 B. required yield that investors seek for various kinds of securities. 
 C. required rate of return that investors seek for various kinds of securities. 
 D. All of the above

Question 7 
A firm has $25 million in assets and its optimal capital structure is 60% equity. If the firm has $18 million in retained earnings, at what asset level will the firm need to issue additional stock? (Assume no growth in retained earnings.)

 A. The firm should have already issued additional stock. 
 B. The firm can increase assets to $30 million. 
 C. The firm can increase assets to $41.67 million. 
 D. There is insufficient information to determine an answer.

Question 8 
The pre-tax cost of debt for a new issue of debt is determined by:
 A. the investor’s required rate of return on issued stock. 
 B. the coupon rate of existing debt. 
 C. the yield to maturity of outstanding bonds. 
 D. All of the above

Question 9 
The cost of equity capital in the form of new common stock will be higher than the cost of retained earnings because of:
 A. the existence of taxes. 
 B. the existence of flotation costs.
 C. investors’ unwillingness to purchase additional shares of common stock. 
 D. the existence of financial leverage.

Question 10 
If the flotation cost goes up, the cost of retained earnings will:
 A. go up. 
 B. go down. 
C. stay the same. 
 D. slowly increase.

Question 11 
Why is the cost of debt normally lower than the cost of preferred stock?
 A. Preferred stock dividends are tax deductions. 
 B. Interest is tax deductible. 
 C. Preferred stock dividends must be paid before common stock dividends. 
 D. Common stock dividends are not tax deductible.

Question 12 
If flotation costs go down, the cost of new preferred stock will:
 A. go up. 
 B. go down.
 C. stay the same. 
 D. slowly increase.

Question 13 
A firm’s debt to equity ratio varies at times because:
 A. a firm will want to sell common stock when prices are high and bonds when interest rates are low. 
 B. a firm will want to take advantage of timing its fund raising in order to minimize costs over the long run. 
 C. the market allows some leeway in the debt to equity ratio before penalizing the firm with a higher cost of capital. 
 D. All of the above

Question 14 
Using the constant dividend growth model for common stock, if Po goes up:
 A. the assumed cost goes up. 
 B. the assumed cost goes down. 
 C. the assumed cost remains unchanged. 
 D. need further information

Question 15 
New common stock is more expensive than Ke:
 A. to compensate for risk. 
 B. to compensate for more dividends. 
 C. to compensate for expansionary problems. 
 D. to cover distribution costs.

Question 16 
In computing the cost of common equity, if D1 goes downward and Po goes up, Ke will:
 A. go up. 
 B. go down.
 C. stay the same. 
 D. slowly increase.

Question 17 
In determining the cost of retained earnings:
 A. the dividend valuation model is inappropriate. 
 B. flotation costs are included. 
 C. growth is not considered. 
 D. the capital asset pricing model can be used.

Question 18 
Within the capital asset pricing model:
 A. the risk-free rate is usually higher than the return in the market. 
 B. the higher the beta the lower the required rate of return. 
 C. beta measures the volatility of an individual stock relative to a stock market index.
 D. None of the above

Question 19 
Using the constant growth model, a firm’s expected (D1) dividend yield is 3% of the stock price, and it’s growth rate is 7%. If the tax rate is .35%, what is the firm’s cost of equity?
 A. 10%
 B. 6.65% 
 C. 8.95% 
 D. More information is required.

Question 20 
For many firms, the cheapest and most important source of equity capital is in the form of:
 A. debt. 
 B. common stock. 
 C. preferred stock. 
D. retained earnings. 

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Multiple Choice Answers
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Question 1 
The market allocates capital to companies based on:
 A. risk. 
 B. efficiency. 
 C. expected returns. 
 D. all of the above 

Question 2 
Which of the following financial assets is likely to have the highest required rate of return based on risk?
 A. Corporate bond 
 B. Treasury bill 
 C. Certificate of Deposit 
 D. Common stock 

Question 3 
A bond that
has a yield to maturity greater than its coupon interest rate will sell for a price:

 A. below par. 
 B. at par. 
 C. above par. 
 D. that is equal to the face value of the bond plus the value of all interest payments. 
Question 4 
Which of the following is not one of the components that makes up the required rate of return on a bond? 
A. Risk premium 
 B. Real rate of return 
 C. Inflation premium 
 D. Maturity payment 

Question 5 
A 20-year bond pays 12% on a face value of $1,000. If similar bonds are currently yielding 9%, What is the market value of the bond? Use annual analysis.
 A. over $1,000 
 B. under $1,000 
 C. over $1,200 
 D. Not enough information given to tell 

Question 6 
A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.
 A. $1,000 
 B. $1127.50 
 C. $1297.85 
 D. $2549.85 

Question 7 
A 30-year zero-coupon bond that yields 12% percent is issued with a $1000 par value. What is the issuance price of the bond (round to the nearest dollar)?
 A. $33 
 B. $83 
 C. $8,333 
 D. $3,888 

Question 8 
A 14-year zero-coupon bond was issued with a $1000 par value to yield 12%. What is the approximate market value of the bond?
 A. $597 
 B. $205 
 C. $275 
 D. $482 

Question 9 
Which of the following does not influence the yield to maturity for a security?
 A. Required real rate of return 
 B. Risk free rate 
 C. Business risk 
 D. Yields of similar securities

Question 10 
An increase in the riskiness of a particular security would NOT affect:
 A. the risk premium for that security. 
 B. the premium for expected inflation. 
 C. the total required return for the security. 
 D. investors’ willingness to buy the security. 

Question 11 
If the inflation premium for a bond goes up, the price of the bond:
 A. is unaffected. 
 B. goes down. 
 C. goes up. 
 D. is unpredictable. 

Question 12 
The risk premium is likely to be highest for:
 A. U.S. government bonds. 
 B. corporate bonds. 
 C. gold mining expedition. 
 D. Either b or c 

Question 13 
A ten-year bond pays 11% interest on a $1000 face value annually. If it currently sells for $1,195, what is its approximate yield to maturity?
 A. 9.33% 
 B. 7.94% 
 C. 12.66% 
 D. 8.10% 

Question 14 
The relationship between a bond’s price and the yield to maturity:
 A. changes at a constant level for each percentage change of yield to maturity. 
 B. is an inverse relationship. 
 C. is a linear relationship. 
 D. has no relationship. 

Question 15 
The longer the time to maturity:
 A. the greater the price increase from an increase in interest rates. 
 B. the less the price increase from an increase in interest rates. 
 C. the greater the price increase from a decrease in interest rates. 
 D. the less the price decrease from a decrease in interest rates. 

Question 16 
What is the approximate yield to maturity for a seven-year bond that pays 11% interest on a $1000 face value annually if the bond sells for $952?
 A. 10.5% 
 B. 10.6% 
 C. 11.9% 
 D. 12.0% 

Question 17 
A higher interest rate (discount rate) would:
 A. reduce the price of corporate bonds. 
 B. reduce the price of preferred stock. 
 C. reduce the price of common stock. 
 D. all of the above 

Question 18 
A bond pays 9% yearly interest in semi-annual payments for 6 years. The current yield on similar bonds is 12%. To determine the market value of this bond, you must:
 A. find the interest factors (IFs) for 12 periods at 12%. 
 B. find the interest factors (IFs) for 6 periods at 9%. 
 C. find the interest factors (IFs) for 12 periods at 6%. 
 D. find the interest factors (IFs) for 6 periods at 6%. 

Question 19 
A 15-year bond pays 11% on a face value of $1,000. If similar bonds are currently yielding 8%, what is the market value of the bond? Use annual analysis.
 A. Over $1,000
 B. Under $1,000 
 C. Over $1,200 
 D. not enough information to tell 

Question 20 
A 10-year bond pays 8% on a face value of $1,000. If similar bonds are currently yielding 10%, what is the market value of the bond? Use annual analysis.
 A. Less than $900 
 B. More than $900 and less than $1100 
 C. More than $1100 
 D. not enough information to tell