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280 PART 3 • STRATEGY IMPLEMENTATION

24. Describe some marketing, finance/accounting, R&D, and management information systems
activities that a small restaurant chain might undertake to expand into a neighboring state.
25. What effect is e-commerce having on firms’ efforts to segment markets?
26. How has the Sarbanes-Oxley Act of 2002 changed CEOs’ and CFOs’ handling of financial
statements?
27. To what extent have you been exposed to natural environment issues in your business
courses? Which course has provided the most coverage? What percentage of your business
courses provided no coverage? Comment.
28. Complete the following EPS/EBIT analysis for a company whose stock price is $20, interest
rate on funds is 5 percent, tax rate is 20 percent, number of shares outstanding is 500 million,
and EBIT range is $100 million to $300 million. The firm needs to raise $200 million in
capital. Use the accompanying table to complete the work.
29. Under what conditions would retained earnings on the balance sheet decrease from one year
to the next?
30. In your own words, list all the steps in developing projected financial statements.
31. Based on the financial statements provided for McDonald’s (pp. 31–32), how much divi-
dends in dollars did McDonald’s pay in 2007? In 2008?
32. Based on the financial statements provided in this chapter for the Litten Company, calculate
the value of this company if you know that its stock price is $20 and it has 1 million shares
outstanding. Calculate four different ways and average.
33. Why should you be careful not to use historical percentages blindly in developing projected
financial statements?
34. In developing projected financial statements, what should you do if the $ amount you must
put in the cash account (to make the statement balance) is far more (or less) than desired?
35. Why is it both important and necessary to segment markets and target groups of customers,
rather than market to all possible consumers?
36. In full detail, explain the following EPS/EBIT chart.

H Stock

Debt
Combo
EPS

L
L EBIT H

100% Common Stock 100% Debt Financing 20% Debt-80%Stock
EBIT
Interest
EBT
Taxes
EAT
# Shares
EPS

Notes

1. Leslie Miller and Elizabeth Weise, “E-Privacy—FTC 3. Kathy Chu and Kim Thai, “Banks Jump on Twitter
Studies ‘Profiling’ by Web Sites,” USA Today Wagon,” USA Today (May 12, 2009): B1.
(November 8, 1999): 1A, 2A. 4. Emily Steel, “Car Makers Take Case to the Web,” Wall
2. Salvatore Parise, Patricia Guinan, and Bruce Street Journal (December 5, 2006): B7; Salvatore Parise,
Weinberg, “The Secrets of Marketing in a Patricia Guinan, and Bruce Weinberg, “The Secrets of
Web 2.0 World,” Wall Street Journal (December 15, Marketing in a Web 2.0 World,” Wall Street Journal
2008): R1. (December 15, 2008): R1.