Dorsey Scott MU Company manufactures and bottles a collection of health-oriented fruity beverages. Dorsey’s CFO. Rozella, recently signed a series of new contracts with several dozen large universities to serve as the sole external beverage supplier on these campuses. Although the company has never internally conducted or externally disclosed any sustainability activities. Dorsey’s CEO. Les, has a strong hunch that the company would be wise to look into the idea of sustainability, given its recent significant growth in the university market. Therefore, Les and Rozella assigned Dorsey’s team of five interns to spend their summer internships creating Dorsey s first corporate sustainability report.
Required:
- 1. CONCEPTUAL CONNECTION Briefly explain the most likely reason(s) that Les believes Dorsey would be wise to begin looking into sustainability at this time.
- 2. CONCEPTUAL CONNECTION List and describe three challenges that the internship team might face in creating Dorsey s first corporate sustainability report.
- 3. CONCEPTUAL CONNECTION List and describe three benefits that Dorsey or its key stakeholders might enjoy as a result of Dorsey creating and issuing its first corporate sustainability report.
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Chapter 13 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
- . Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.Refer back to the original data. Calculate the WACC for Refresh Resorts.arrow_forwardThe following quote appeared in an article entitled ‘Business and society in the coming decades’, which was available on the website of McKinsey & Company (accessed in October 2015).“There are compelling reasons companies should seize the initiative to drive social and business benefits. First, in an interconnected world facing unprecedented environmental and social challenges, society will demand it. Increasingly, a basic expectation among customers, governments, and communities will be that the companies they do business with provide a significant net positive returnfor society at large, not just for investors. This will be part of the implicit contract or license to operate”.Required:a) Explain the above statement in the context of corporate social responsibility.b) Further, do you think such a statement would impact the perceived ‘legitimacy’ of companies? Explain.arrow_forwardThe following quote appeared in an article entitled ‘Business and society in the coming decades’, which was available on the website of McKinsey & Company (accessed in October 2015).“There are compelling reasons companies should seize the initiative to drive social and business benefits. First, in an interconnected world facing unprecedented environmental and social challenges,society will demand it. Increasingly, a basic expectation among customers, governments, and communities will be that the companies they do business with provide a significant net positive return for society at large, not just for investors. This will be part of the implicit contract or license to operate”.Required:a) Explain the above statement in the context of corporate social responsibility. [Word limit 150-200words] b) Further, do you think such a statement would impact the perceived ‘legitimacy’ of companies?Explain. [Word limit 200 – 250]arrow_forward
- . Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.How does the selection of asset measurement method affect goal congruence?arrow_forward. Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q. Why might Refresh Resorts want to use EVA instead of RI for evaluating the performance of the three spas?arrow_forwardEve Corporation is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the company’s current offerings but offer a complementary fit to its existing product line. Sergei Bates, senior production department manager, is very excited about the high-tech new equipment that will have to be acquired to produce the new products. Will Smith, the company’s CFO, has provided the following projections based on results with and without the new products. Without New Products With New Products Sales revenue $10,000,000 $16,000,000 Net income $500,000 $960,000 Average total assets $5,000,000 $12,000,000 Instructions a) Compute the company’s return on assets, profit margin, and asset turnover, both with and without the new product line. b) Discuss the implications that your findings in part (a) have for the company’s decision.arrow_forward
- Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.Calculate RI for each of the spas based on operating income and using total assets as the measure of investment. Suppose that the Key West spa is considering adding a new group of saunas from Finland that will cost $225,000. The saunas are expected to bring in operating income of $22,000. What effect would this project have on the RI of the Key West spa? Based on RI, would the Key West manager accept or reject this project? Without resorting to calculations, would the other managers accept or reject the project? Why?arrow_forwardNextG Limited is a leading manufacturer of automotive components. It supplies to the original equipment manufacturers as well as the replacement market. Its projects typically have a short life as it introduces new models periodically. You have recently joined NextG Limited as a financial analyst reporting to Mr. Atiamoh, the CFO of the company. He has provided you the following information about two mutually exclusive projects. A and B, that are being considered by the Executive Committee of NextG Limited:Project A is an extension of an existing line. Its cash flow will decrease over time. Project B involves a new product. Building its market will take some time and hence its cash flow will increase over time.The expected net cash flows of the two mutually exclusive projects are as follows. Mr. Atiamoh believes that all the two projects have risk characteristics similar to the average risk of the firm and hence NextG’s cost of capital of 10 percent will apply to them and both…arrow_forwardIn a recent annual report and related Global Responsibility Report, Starbucks provides information on company performance on several dimensions. Select whether the following items best fit into the financial (label your answer "Profit"), social (label your answer "People"), or environmental (label your answer "Planet") aspects of triple bottom line reporting. 1. Increased diversity training for employees. 2. Operating cash flow totaled $4.2 billion. 3. New stores are built using certified sustainable building techniques. 4. Operating income totaled $4.1 billion. 5. Decreased amounts of packaging materials used. 6. Increased aluminum recycling.arrow_forward
- Sunny Nights Inc. is completely powered by the city power grid, but management is considering switching fuel sources in an effort to improve the publics perception of the companys corporate social responsibility. Within the next five years, management wants the company to be completely solar powered and to market this change through company advertising. Upon consulting with Sunny Nights, you have determined that an appropriate course of action is to include this CSR activity as a strategic objective on the companys current balanced scorecard. a. Determine the appropriate performance perspective for the CSR strategic objective. b. Suggest one possible performance metric for the objective. c. Determine an appropriate yearly performance target for the performance metric.arrow_forwardPacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company's major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim's board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement. Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings. Furniture 132,500 $ 10.00 6.00 2.00 Product…arrow_forwardStarDucks, Inc (SDUX) is an American coffee company with more than 10,000 coffeehouses operating in the United States. Unlike many of its major competitors, it remained focused only on the production and sale of coffee drinks so far, rather than diversifying into other similar food and beverage lines. Recently, to respond to increasing demands from its customer regarding new products, and to boost the company’s growth, the executive staff has been seriously thinking about entering into a different business line “SDUX Gelato” to realize new growth opportunities. An initial forecasting effort has been done to project the initial investment and subsequent cash flows for the next 5 years: Year 012345 Cash Flow ($000s) -1,750,000 -150,000 420,000 550,000 200,000 125,000 After the initial 5 years, SDUX believes the market will continue in perpetuity: however, given that the segment will reach maturity, it would very likely be a zero growth business. The company uses NPV for capital budgeting…arrow_forward
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