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 1 Mr. Li is the General Manager of CDE Canada Limited which is a subsidiary of a publicly traded Canadian 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 \\( \\mathrm{XYZ} \\) and late in 2019 CDE discontinued the production and sales of product \\( X Y Z \\). 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 retum. 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 CDE for the year ended December 31, 2020 and a proposed capital expenditure. Questions for This Scenario 1. Comment on the appropriate retum on investment calculation for Mr. Li and calculate the amount to 1 decimal place. 2. Comment on the appropriate retum on investment calculation for CDE Limited and calculate the amount to 1 decimal place. 3. Comment on the appropriate retum on investment calculation for the publicly traded Canadian firm and calculate the amount to 1 decimal place. 4. Would Mr. Li 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 CDE Canada Limited Balance Sheet as at December 31, 2020 Version I CDE Canada Limited Income Statement for the year ended December 31, 2020 Sales Cost of sales Gross Margin Selling and Administrative Operating income Interest at \6 Net Income before tax Income tax Net income Capital expenditure proposed Operating Income by year \\( \\begin{array}{r}\\$ 432,000 \\\\ 277,200 \\\\ \\hline 154,800 \\\\ 99,360 \\\\ \\hline 55,440 \\\\ 19,440 \\\\ \\hline 36,000 \\\\ 11,900 \\\\ \\hline \\$ 24,100 \\\\ \\hline\\end{array} \\) 50,000 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
