Description of this paper

CSU MSL5080 Unit II case study

Description

solution.


Question

Read the Case Study on pages 110-111 of the textbook entitled “Starting Right Corporation.”

 

 

Once you have finished reading the Case Study, answer the associated Discussion Questions 1-6 in a minimum three-page paper.Your paper should be appropriately cited using APA style. You should also include a minimum of two scholarly sources

 

 

After watching a movie about a young woman who quit a successful

 

corporate career to start her own baby food company, Julia Day decided

 

that she wanted to do the same. In the movie, the baby food company was

 

very successful. Julia knew, however, that it is much easier to make a

 

movie about a successful woman starting her own company than to actually

 

do it. The product had to be of the highest quality, and Julia had to

 

get the best people involved to launch the new company. Julia resigned

 

from her job and launched her new company- Starting Right.

 

 

Julia decided to target the upper end of the baby food market by

 

producing baby food that contained no preservatives but had a great

 

taste. Although the price would be slightly higher than for existing

 

baby food, Julia believed that parents would be willing to pay more for

 

a high-quality baby food. Instead of putting baby food in jars, which

 

would require preservatives to stabilize the food, Julia decided to try

 

a new approach. The baby food would be frozen. This would allow for

 

natural ingredients, no preservatives, and outstanding nutrition.

 

 

Getting good people to work for the new company was also important.

 

Julia decided to find people with experience in finance, marketing, and

 

production to get involved with Starting Right. With her enthusiasm and

 

charisma, Julia was able to find such a group. Their first step was to

 

develop prototypes of the new frozen baby food and to perform a small

 

pilot test of the new product. The pilot test received rave reviews.

 

 

The final key to getting the young company off to a good start was to

 

raise funds. Three options were considered: corporate bonds, preferred

 

stock, and common stock. Julia decided that each investment should be

 

in blocks of $30,000. Furthermore, each investor should have an annual

 

income of at least $40,000 and a net worth of $100,000 to be eligible to

 

invest in Starting Right. Corporate bonds would return 13% per year for

 

the next five years. Julia furthermore guaranteed that investors in the

 

corporate bonds would get at least $20,000 back at the end of five

 

years. Investors in preferred stock should see their initial investment

 

increase by a factor of 4 with a good market or see the investment worth

 

only half of the initial investment with an unfavorable market. The

 

common stock had the greatest potential. The initial investment was

 

expected to increase by a factor of 8 with a good market, but investors

 

would lose everything if the market was unfavorable. During the next

 

five years, it was expected that inflation would increase by a factor of

 

4.5 % each year.

 

 

Discussion Questions:

 

 

Sue Pansky, a retired grade-school teacher, is considering investing in

 

Starting Right. She is very conservative and is a risk avoider. What

 

do you recommend?

 

 

Ray Cahn, who is currently a commodities broker, is also considering an

 

investment, although he believes that there is only an 11% chance of

 

success. What do you recommend?

 

 

Lila Battle has decided to invest in Starting Right. While she believes

 

that Julia has a good chance of being successful, Lila is a risk avoider

 

and very conservative. What is your advice to Lila?

 

 

George Yates believes that there is an equally likely chance for

 

success. What is your recommendation?

 

 

Peter Metarko is extremely optimistic about the market for the new baby

 

food. What is your advice for Pete?

 

 

Julia Day has been told that developing the legal documents for each

 

fund-raising alternative is expensive. Julia would like to offer

 

alternatives for both risk-averse and risk-seeking investors. Can Julia

 

delete one of the financial alternatives and still offer investment

 

choices for both risk seekers and risk avoiders?

 

Paper#46131 | Written in 23-Jan-2016

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