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 D Mr. Chan is the President of JKL 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 JKL discontinued the production and sales of product XYZ. Specific assets held for disposition and not used in 2020 total have gross value of $27,778. 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 JKL for the year ended December 31, 2020 and a proposed capital expenditure. Version D Page 2 of 3 Questions for This Scenario 1. Comment on the appropriate return on investment calculation for Mr. Chan and calculate the amount to 1 decimal place. 2. Comment on the appropriate return on investment calculation for JKL 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. Chan 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 JKL Canada Limited Balance Sheet as at December 31, 2020 Item $ Current assets $54,000 Non-current assets 126,000 Total assets $180,000 Current liabilities $30,600 Long term debt 90,000 Equity 59,400 Total liabilities and equity $180,000 Idle Assets $27,778 Required return from operations based on total 10% gross assets Version D Page 3 of 3 JKL Canada Limited Income Statement for the year ended December 31, 2020 Item $ Sales $216,000 Cost of sales 138,600 Gross Margin 77,400 Selling and Administrative 49,680 Operating income 27,720 Interest at 6% 9,720 Net Income before tax 18,000 Income tax 5,900 Net income $12,100 Expert Answer