Group Project Part B Instructions General Instructions for Part B The second part of the project involves the analysis of a case study. Each group will be given a different scenario to analyze. Your group must analyze the case you have been presented and in a 1-2 page written report answering the 5 questions posed in the scenario. Please note - each scenario asks different questions, be sure to read your group's questions carefully. Please keep your answers to each question brief and concise. Be sure to back up your answers with evidence from the documents provided in the scenario. Scenario F Mr. Jekyl is the General Manager of PQR Canada Limited which is a subsidiary of a large multinational firm that is traded on a major stock exchange. The parent company has responsivity for all capital expenditure decisions of the subsidiary, and can dictate if the subsidiary must discontinue operations in a market segment and sell the associated assets used in this segment. During 2019 the parent company told the subsidiary that it must discontinue product XYZ and late in 2019 PQR discontinued the production and sales of product XYZ. Specific assets held for disposition and not used in 2020 total have gross value of $55,556. All entities are evaluated on the return on the assets invested and the required return must be at least 10% in order to earn annual bonuses which are scaled up as the ROI increases above the 10% required return. For purposes of ROI, fixed assets are valued at gross value and not net value. On the next pages you see condensed summary financial statements for PQR for the year ended December 31, 2020 and a proposed capital expenditure. Questions for This Scenario 1. Comment on the appropriate return on investment calculation for Mr. Jekyl and calculate the amount to 1 decimal place. 2. Comment on the appropriate return on investment calculation for PQR Limited and calculate the amount to 1 decimal place. 3. Comment on the appropriate return on investment calculation for the large multinational firm and calculate the amount to 1 decimal place. 4. Would Mr. Jekyl be motivated to make the capital investment at the present time? BRIEFLY justify your answer. 5. Do you think the bonus system suits the shareholders best interests? BRIEFLY justify your answer. Financial Statements PQR Canada Limited Balance Sheet as at December 31, 2020 Item $ Current assets $60,000 Non-current assets 140,000 Total assets $200,000 Current liabilities $34,000 Long term debt 100,000 Equity 66,000 Total liabilities and equity $200,000 Idle Assets $55,556 Required return from operations based on total 10% gross assets PQR Canada Limited Income Statement for the year ended December 31, 2020 Item $ Sales $240,000 Cost of sales 154,000 Gross Margin 86,000 Selling and Administrative 60,000 Operating income 26,000 Interest at 6% 6,000 Net Income before tax 20,000 Income tax 6,600 Net income $13,400 Capital expenditure proposed 50,000 Operating Income by year 2,000 Year 1 4,000 Year 2 6,000 Year 3 18,000 Year 4 30,000 Year 5 30,000 Year 6 30,000 Year 7 30,000 Year 8 30,000 Year 9 30,000 Year 10

Questions for This Scenario 1. Comment on the appropriate return on investment calculation for Mr. Jekyl and calculate the amount to 1 decimal place. 2. Comment on the appropriate return on investment calculation for PQR Limited Required return from \begin{tabular}{l|l} and calculate the amount to 1 decimal place. & operations based on total \end{tabular} 3. Comment on the appropriate return on investment calculation for the large multinational firm and calculate the amount to 1 decimal place. 10% 4. Would Mr. Jekyl be motivated to make the capital investment at the present time? BRIEFLY justify your answer. 5. Do you think the bonus system suits the shareholders best interests? BRIEFLY justify your answer. Financial Statements PQR Canada Limited Balance Sheet as at December 31,2020 GrOUp Project - Part B InStrUC- During2019theparentcompanytoldthesubsidiarythatitmustdiscontinueproductXYZandlatein2019PQRdiscontinuedtheproductionandsalesofproductXYZ. Specific assets held for disposition and not used in 2020 total have gross value of tions $55,556. All entities are evaluated on the return on the assets invested and the required return must be at least 10% in order to earn annual bonuses which are scaled up as the ROI General Instructions for Part B increases above the 10% required return. The second part of the project involves the analysis of a case study. Each group will For purposes of ROI, fixed assets are valued at gross value and not net value. be given a different scenario to analyze. Your group must analyze the case you have been presented and in a 1-2 page written report answering the 5 questions posed in On the next pages you see condensed summary financial statements for PQR for the the scenario. year ended December 31, 2020 and a proposed capital expenditure. Please note - each scenario asks different questions, be sure to read your group's questions carefully. Please keep your answers to each question brief and concise. Be sure to back up your answers with evidence from the documents provided in the scenario. Scenario F Mr. Jekyl is the General Manager of PQR Canada Limited which is a subsidiary of a large multinational firm that is traded on a major stock exchange. The parent company has responsivity for all capital expenditure decisions of the subsidiary, and can dictate if the subsidiary must discontinue operations in a market segment and sell the associated assets used in this segment. PQR Canada Limited Income Statement for the year ended December 31,2020