闪电代写 -代写CS作业_CS代写_Finance代写_Economic代写_Statistics代写_代码代做_IT代写_加急帮助

Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

MGAC02 – 2022 Winter

Case Assignment 1

You have recently joined Rupert Tools Ltd. as the CFO. Rupert is a Canadian public company that manufactures electronic appliances and has been in business for over 25 years. Profits from the last few years have declined significantly. Rupert management has an aggressive plan in place to revive the business in the future. In preparation of the upcoming Board ofDirector’s meeting, you are asked by Wayne Smart, the CEO ofRupert to review the following issues, discuss the financial implications and provide a recommendation how they should be accounted for and what Rupert should do. Today is January 15, 2023 and Wayne has asked you to have a report ready for discussion by the end of January.

At the moment, Rupert has an overdraft facility and a $ 2,000,000 three year term loan with its bank, Scarborough Bank. Rupert’s loan arrangement with Scarborough Bank includes a covenant that Rupert will maintain its debt to equity ratio ofno more than 1.30:1. If Rupert fails to meet this and other covenants at year end, all loan facilities become immediately due and payable. As it appears that Rupert’s debt to equity ratio on December 31, 2022 will likley be 1.32:1. Rupert obtained a letter from Scarborough Bank dated December 15, 2022, agreeing to provide until December 31, 2023 for Rupert to remedy this defect.

Rupert issued a debenture bond to ABC Bank to finance a new technology it developed 10 years ago for its product. The debenture was $ 500,000, issued at face value, with a 10-year term and interest payable at 10%. The debenture is due on December 31, 2022 and Rupert does not have the funds to repay the debenture or the interest. As a result, ABC has agreed to extend the debenture due date for five more years and reduce the principal amount to $ 300,000 in exchange for receiving 20,000 common shares ofRupert, currently trading at $ 5 per share. Interest will still be payable at 10% and will continue to be due on December 31 of each year. The current market rate is 12%.

On July 1, 2022, Rupert took advantage of a vendor-provided financing offer to acquire computer equipment. Rupert signed a $ 20,000 notes payable in full on July 1, 2025. Interest is payable annually at a rate of 2% per annum. Rupert’s bank previously advised that it would charge an interest rate of 8% per annum for a loan on similar terms.

As part ofRupert’s revival plan, Rupert plans to adopt new technologies with some of its products and requires a new machine. Rupert has the option of buying a new machine or leasing it. Rupert is leaning toward leasing the machine since it is expensive to buy and Rupert would have to borrow money from the bank. If Rupert had purchased the machine, it would cost Rupert $ 1.9 million. Rupert is currently in negotiation with Crown Corp and the following are the proposed terms for the lease:

• Crown would manufacture and lease to Rupert a unique machine. Crown has no other use for it ifRupert does not either purchase it and the end ofthe lease or renew the lease.

• The lease would be for a period of 12 years.

• The lease payment of $ 150,000 would be paid at the end of each year.

• Rupert would have the option to purchase the machine for $ 850,000 at the end of the lease term, which is equal to the expected fair market value at that time; otherwise, the machine would be returned to the lessor.

• Rupert has the option to lease the machine for another 8 years beyond the original lease period at $ 150,000 per year.

• The rate that is implicit in the lease is 9% and this is known to Rupert.

• There was an understanding that Rupert would either renew the lease or exercise the purchase option.

A suit for breach of contract seeking damages of $ 1 million was filed by a competitor against Rupert on July 1, 2022. This issue is still under dispute. At the end of2022, Rupert’s legal counsel believes that an unfavourable outcome is likely. A reasonable estimate ofthe court’s award to the plaintiff is between $ 300,000 and $ 700,000. No amount within this range is a better estimate od potential damages than the other amount.

To encourage retailers to purchase the company’s products, Rupert currently employs a reward program. Retailers that reach pre-specified levels of purchases in the current year are provided with a cash discount the following year, For example, if a retailer makes purchases of between $ 1 million and $ million during the year, it is entitled to a 2% discount on all purchases the following year. Purchases in the range of $ 2 to $ 5 million entitle the retailer to a 4% concession, and purchases in excess of $ 5 million entitle the retailer to a 6% reduction. Wayne is considering replacing the discount program by contracting Points Plus Inc. is an independent company that offers points-based reward program to clients. Rupert will reward points to the retailers based on their products and services; the points can be used to acquire a variety ofcommunication products and services from Points Plus Inc. Rupert will pay a fee to Points Plus Inc for this service based o the number of points it awards. Wayne intends to build the reward system such that the cost ofthe rewards provided under the new program will be equivalent to the discounts provided under the old program.