As you do the write up for the Rockboro Case, here are some questions to guide your letter. What are the problems here, and what do you recommend?What are the implications of different payout levels for Rockboro’s capital structure and unused debt capacity?What is the nature of the dividend decision that Larson must make? What are the pros and cons of the alternative positions? (Or alternatively, why pay any dividends?) How will Rockboro’s various providers of capital, such as its stockholders and bankers, react to a declaration of no dividend? What about the announcement of a 40% payout? How would they react to a residual payout?What risks does the firm face?What is the nature of the share-repurchase decision that Larson must make? How would this affect the dividend decision?Does the stock market appear to reward high-dividend payout? What about low-dividend payout? Does it matter what type of investor owns the shares? What is the impact on the share price of the dividend policy?What should Larson (you) recommend?We obviously will spend today going into more depth on all of these issues so that you understand how to frame your recommendation.

Ethical Issues at Apple page 132.The closing case describes the deplorable working conditions at the Apple factory in China page 132 (look below). Wages are very low and working conditions are poor.What do you think apple should do to ethically to correct this Problem?Ethical Issues at AppleIn mid-2006, news reports surfaced suggesting there were systematic labor abuses at a factory in China that makes the iPhone and iPod for Apple, Inc. According to the reports, workers at Hongfujin Precision Industry were paid as little as $50 a month to work 15-hour shifts making Apple products. There were also reports of forced overtime and poor living conditions for the workers, many of them young women who had migrated from the countryside to work at the plant and lived in company-owned dormitories.The 2006 articles were the work of two Chinese journalists, Wang You and Weng Bao, employed by China Business News, a state-run newspaper. The target of the reports, Hongfujin Precision Industry, was reportedly China’s largest export manufacturer with overseas sales totaling $14.5 billion. Hongfujin is owned by Foxconn, a large Taiwanese conglomerate, whose customers (in addition to Apple) include Intel, Dell, and Sony Corporation. The Hongfujin factory is a small city in its own right, with clinics, recreational facilities, buses, and 13 restaurants that serve the 200,000 employees.Upon hearing the news, Apple management responded quickly, pledging to audit the operations to make sure Hongfujin was complying with Apple’s code on labor standards for subcontractors. Managers at Hongfujin took a somewhat different tack; they filed a defamation suit against the two journalists, suing them for $3.8 million in a local court, which promptly froze the journalists’ personal assets pending a trial. Clearly, the management of Hongfujin was trying to send a message to the journalist community—criticism would be costly. The suit sent a chill through the Chinese journalist community because Chinese courts have shown a tendency to favor powerful, locally based companies in legal proceedings.Within six weeks, Apple had completed its audit. The company’s report suggested that although workers had not been forced to work overtime and were earning at least the local minimum wage, many had worked more than the 60 hours a week allowed for by Apple, and their housing was substandard. Under pressure from Apple, management at Hongfujin agreed to bring practices in line with Apple’s code, committing to building new housing for employees and limiting work to 60 hours a week.However, Hongfujin did not immediately withdraw the defamation suit. In an unusually bold move in a country where censorship is still common, China Business News gave its unconditional backing to Wang and Weng. The Shanghai-based news organization issued a statement arguing that what the two journalists did “was not a violation of any rules, laws, or journalistic ethics.” The Paris-based Reporters Without Borders also took up the case of Wang and Weng, writing a letter to Apple’s then CEO, the late Steve Jobs, stating, “We believe that all Wang and Weng did was to report the facts and we condemn Foxconn’s reaction. We therefore ask you to intercede on behalf of these two journalists so that their assets are unfrozen and the lawsuit is dropped.”Once again, Apple moved quickly, pressuring Foxconn behind the scenes to drop the suit. Foxconn agreed to do so and issued a “face-saving” statement saying the two sides had agreed to end the dispute after apologizing to each other “for the disturbances brought to both of them by the lawsuit.” The experience shed a harsh light on labor conditions in China. At the same time, the response of the Chinese media, and China Business News in particular, point toward the emergence of some journalistic freedoms in a nation that has historically seen news organizations as a mouthpiece for the state.More recent news may indicate new ethical concerns at Apple's production facilities in China. In a 2014 story by BBC News, Apple is again the center of issues related to workers' hours, ID cards, housing arrangements, work meetings, and juvenile workers at its Pegatron facilities on the outskirts of Shanghai. Apple disagreed strongly with the portray of the Pegatron factory's working conditions, and stated in the BBC News article that "We are aware of no other company doing as much as Apple to ensure fair and safe working conditions." Sources: R. Bilton, "Apple Failing to Protect Chinese Factory Workers," BBC News, December 18, 2014; E. Kurtenbach, “The Foreign Factory Factor,” Seattle Times, August 31, 2006, pp. C1, C3; Elaine Kurtenbach, “Apple Says It’s Trying to Resolve Dispute over Labor Conditions at Chinese iPod Factory,” Associated Press Financial Wire, August 30, 2006; “Chinese iPod Supplier Pulls Suit,” Associated Press Financial Wire, September 3, 2006. Copyright (c) 2006 by Associated Press. Used with permission

Overview Foreign exchange impacts the profitability of transactions in international markets. It can turn a profitable business into one that loses money and can turn an unprofitable business into one that makes money. In this assignment, you will analyze the impact of foreign exchange on different business scenarios and present your findings in a short business memo. Scenario You manage the international business for a manufacturing company. You are responsible for the overall profitability of your business unit. Your company ships your products to Malaysia. The retail stores that buy your products there pay you in their local currency, the Malaysian ringgit (MYR). All sales for the first quarter are paid on April 1st and use the exchange rate at the close of business on April 1st or the first business day after April 1st if it falls on a Saturday or Sunday. The company has sales contracts with different vendors that determine the number of units sold well in advance. The company is contractually obligated to sell 4,000 units for exactly 1.25 million MYR for the first quarter. The break-even point for each unit is $90 in U.S. dollars. Use the following foreign exchange rates: On January 1, the daily spot rate is 3.13 MYR, and the forward rate is 0.317 U.S. dollars/MYR for April 1st of the same year. On April 1, the daily spot rate is 3.52 MYR. Prompt Using the information above, create a short business memo that explains the profitability, viability, and importance of considering foreign exchange on the basis of the scenarios below. Scenario 1: The company uses the spot rate on April 1st to convert its sales revenue in MYR to U.S. dollars. Scenario 2: On January 1st, the company uses that day’s forward rate today to lock in a foreign exchange rate for its expected 1.25 million MYR in sales. This means the company agreed to exchange 1.25 million MYR using the forward rate on January 1st when April 1 arrives. Scenario 3: Another option for the company is to spend the foreign currency and avoid any currency exchange. Because it is a manufacturing company, raw materials are always needed. Specifically, you must address the following rubric criteria: Foreign Exchange Calculations: Determine the profitability of the international business by using foreign exchange calculations for the first and second scenarios. Spend or Save: Discuss what you would need to consider when determining if the company should buy raw materials with the foreign currency in an effort to avoid foreign exchange risk and whether this is a viable option for the company. Conclusion: After determining the result for each scenario, explain the importance to a company’s financial results of considering foreign exchange risk.