Capstone Project Questions

Work on the following questions until the due date and finalize your answers. When you feel confident about your answers, go to Project Submission to choose your answers from multiple choices. Once you attempt to submit your answers, you'll have an hour to submit them. . Discussing with a classmate a couple of questions is fine but beware of "free-riders" who'll receive free help but will not help you back! I'm available to help with any general question or clarification but will not be able to give you an answer to a specific question.

Answers to some of the following questions can be found in Starbucks' Annual Report for 2021. For other questions that are more general, you'll need to depend on your knowledge, additional research, and/or old class notes from previous courses.

Question 1 (company-operated stores).As of October 3, 2021, Starbucks had 5,358 stores in China.This was a ___% growth in the number of stores compared to the previous year as reported in the same report.

Hint: page 7 of the report

Question 2 (licensed stores).As of October 3, 2021, of all the licensed Starbucks stores outside the United States, how many licensed stores were in Korea?

Question 3 (cross-price elasticity).Suppose the price of tea served in all restaurants goes up by 10% which causes consumers to buy 6% more Starbucks coffee. The cross-price elasticity of demand for Starbucks coffee is

Question 4 (current ratio). A current ratio measures ______________________

Hint: The question is asking what a current ratio measures or looks at.

Question 5 (current ratio).Using the consolidated balance sheet and the data as of October 3, 2021, what is Starbucks' Current Ratio?

Question 6 (market structure).Based on your research or from knowledge from economics courses, which market structure Starbucks belongs to?

Question 7 (future value).In your finance courses, you learned concepts related to Present Value and Future Value. Starbucks' "Cash and Cash Equivalents" in 2021 was $6,455.7 million (page 43). Out of this cash amount if Starbucks decides to invest $455.7 million for 6 years at an interest rate of 5%, what would be the future value of $455.7 million?

Question 8 (Asset vs. Debt).Using the company's 2021 data (as of Oct 3, 2021) and by looking at total assets compared to its total liabilities what is the company's Debt Ratio?

Hint: the question is asking for Debt Ratio, not Debt-Equity ratio.

Question 9 (advertising expense).Using the 2021 data, what percent of Starbucks' total net revenue was spent on advertising?

Hint: find total net revenue from page 41 and then find advertising expense from the report by doing a search on "advertising" using ctrl F.

Question 10 (pricing).For the most part, Starbucks is a master of employing to maximize profits, and they use research and customer analysis to formulate targeted price increases that capture the greatest amount consumers are willing to pay without driving them off.

a. Value-based pricing.

b. Bundled pricing.

c. Break-even pricing.

d. Cost-based pricing.

Question 11 (demand).For Starbucks, price increases throughout the company's history have already deterred the most price-sensitive customers, leaving a loyal, higher-income consumer base that perceives these coffee beverages as an affordable luxury. Since their loyal following is not especially price sensitive, Starbucks coffee maintains a

fairly and a small price increase can have a huge impact on their margins without decreasing demand for beverages.

a Inelastic demand curve; positive.

b. Elastic demand curve; negative.

c. Horizontal demand curve; neutral.

d. Vertical demand curve; detrimental.

Question 12 (Competition).Starbucks's primary competitors for coffee beverage sales are:

Hint: what type of businesses? You'll see multiple choice options when you submit.

Question 13 (Employees).For Starbucks, based on 2021 data, approximately what percent of total worldwide employees are employed outside the United States?

Hint: page 4

Question 14 (Risk). Item 1A in the Annual Report talks about risk factors faced by the company. One of the risks related to operating a global business was mentioned as

a. We are highly dependent on the financial performance of our North America operating segment.

b. We have a significant operation in Ukraine and the war poses a lot of threats to our business.

c. Our stores in the Middle East face threats of terrorism.

d. Uncertainty of our coffee shipments from Africa.

Question 15.Based on Starbucks's 2021 Annual Report, cash provided by operating activities was

$6.0 billion for fiscal 2021, compared to $1.6 billion for fiscal 2020. This was because

a. Of the unexpected increase in demand for coffee in China and Korea at the end of the pandemic.

b. Of higher net earnings and lapping the U.S. federal tax payment related to the Nestl transaction in fiscal 2020.

c. Of business recovery and restoration of certain leverage metrics as well as a sudden halt in our share repurchase program.

d. None of the statements are correct.

Question 16 (current yield).Suppose Starbucks issued some corporate bonds with a face value of $1,050 per bond. Suppose you purchased one bond and paid $900 for it. Assume you get an $80 annual coupon payment. What is the Current Yield for your bond?

Note: Just like some of the other questions, this is a hypothetical question and the answer is not in the Annual Report!

Question 17 (Business Ethics).All organizations, large and small, including Starbucks must

comply with the new law known as . This bill or law was enacted in

2002 as a reaction to major corporate and accounting scandals involving Enron, WorldCom, Tyco, and other companies.

Hint: The law was passed because of the unethical accounting practices some companies were involved with.

Question 18 (Human Resource Management).Based on Starbucks's Annual Report, we don't have enough information on the company's staffing practices and policies. Let's assume each segment of Starbucks Corporation manages human resource issues on a local basis. A local employee heads a subsidiary because headquarters managers are not considered to have adequate local knowledge. In human resource management literature, this approach is known as the __________.

Question 19 (company outlook). Based on the 2021 Annual Report, which statement is correct?

a. Starbucks returned $2.1 billion to their shareholders in fiscal 2021 through dividends.

b. Starbucks does not have growth opportunities in the Tea and Fresh Juice products mix, so no need to waste resources to build up these products along the same line as their core coffee products.

c. Coffee beans are a significant input into the Starbucks value chain and the market prices of high-quality coffee beans have been quite stable in recent years. So, there is no urgency to adopt an effective hedging strategy to lock in prices and control future costs.

d. None of the statements are correct.

Question 20. Which of the following statement is correct based on the 2021 Annual Report?

a. Revenues from our licensed stores accounted for 9% of total net revenues in fiscal 2021.

b. Starbucks has a significant geographical presence across the globe and maintains a 6.7% market share in the United States and has operations in 9 countries.

c. The emerging markets of Brazil, India, China, South Africa, and Mexico has a growing middleclass population but are yet to show significant demand for coffee as a daily beverage.

d. None of the statements are correct.

Question 21. Suppose Starbucks makes all pastries, muffins, and cookies in-house rather than buying these items from a bakery supplier. This strategy is known as what?

Question 22.Starbucks stock is traded in which stock market and what is the stock ticker symbol?

Question 23.True or False? Based on the Annual Report, in the fourth quarter of fiscal 2021, Starbucks sold its 50% ownership interest in Starbucks Coffee Korea Co., Ltd.

Question 24.Starbucks is not a typical example of monopolistic competition when it comes to advertising expenses. Why?

a. Compared to other companies of the same size, Starbucks spends very little on advertising.

b. Compared to other companies of the same size, Starbucks spends a lot on advertising.

c. Starbucks equates marginal revenue with marginal cost to maximize profits.

d. None of the choices are correct.

Question 25. (Inventory of Coffee). True or False? According to the 2021 Annual Report, as of Oct 3, 2021, Starbucks had unroasted coffee inventory worth $133 million.