Keller, L. Kevin & Kotler, Philip. (2012). Marketing management (14th ed.). Upper Saddle River, NJ: Prentice Hall

Read the Ritz Carlton case study in Chapter 13 on page 379 in your textbook. Answer the two questions at the end of the study (p. 380). Support your answers with a minimum of one source per question, no more than five years old. Your answer to each question should be approximately 400 words using APA format.

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Kellogg Co. recently earned a profit of $2.52 earnings per share and has a P/E ratio of 13.5. The dividend has been growing at a 5 percent rate over the past few years.

If the growth rate continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio declined to 12 in five years?

Stock Price??

Stock Price with new P/E

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Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2011, the date of the decedent’s death. The executor distributes the land to Kelly on November 12, 2011, at which time the fair market value is $49,000. The fair market value on February 4, 2012, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2012, for $48,000. What is her recognized gain or loss?(3pts)($1,000).($2,000).($47,000).$1,000.None of the above.

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Kelly owns all the stock in Duncan Corp. Her Duncan stock has a basis of $120,000 and a fair market value of $150,000. Duncan Corp. is merged into Munro Cop. Pursuant to the reorganization, Kelly receive Munro preferred stock worth $50,000 and Munro common stock worth $100,000 in exchange for her Duncan Corp. 

a.   What is the amount and character of Kelly’s realized and recognized gain

b.   What is Kelly’s tax basis for her Munro Corp. preferred stock and common stock

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Kelly Tough, president of Tu-Rock Industries Inc., believes that reporting operating cash flow per share on the income statement would be a useful addition to the company’s just completed financial statements. Please read a transcript of the discussion which took place between Kelly Tough and Tu-Rock controller, Tripp Kelso, in January, after the close of the fiscal year. Kelly: I have been reviewing our financial statements for the last year. I am disappointed that our net income per share has dropped by 10% from last year. This is not going to look good to our shareholders. Isn’t there anything we can do about this? Tripp: What do you mean? The past is the past, and the numbers are in. There isn’t much that can be done about it. Our financial statements were prepared according to generally accepted accounting principles, and I don’t see much leeway for significant change at this point. Kelly: No, no. I’m not suggesting that we “cook the books.” But look at the cash flow from operating activities on the statement of cash flows. Kelly: The cash flow from operating activities has increased by 20%. This is very good news—and, I might add, useful information. The higher cash flow from operating activities will give our creditors comfort. Tripp: Well, the cash flow from operating activities is on the statement of cash flows, so I guess users will be able to see the improved cash flow figures there. Kelly: This is true, but somehow I feel that this information should be given a much higher profile. I don’t like this information being “buried” in the statement of cash flows. You know as well as I do that many users will focus on the income statement. Therefore, I think we ought to include an operating cash flow per share number on the face of the income statement—someplace under the earnings per share number. In this way users will get the complete picture of our operating performance. Yes, our earnings per share dropped this year, but our cash flow from operating activities improved! And all the information is in one place where users can see and compare the figures. What do you think? Tripp: I’ve never really thought about it like that before. I guess we could put the operating cash flow per share on the income statement, under the earnings per share. Users would really benefit from this disclosure. Thanks for the idea—I’ll start working on it. Kelly: Glad to be of service. How would you interpret this situation? Is Tripp behaving in an ethical and professional manner?

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