Case 1: Purchase Point Media Corporation (PPMC)

Senior Capstone: Business : Purchase Point Media Corporation (PPMC)

Lesson 2 Overview

This case is based on actual financial projections developed and

provided by a publicly traded firm, Purchase Point Media Corporation

(PPMC). Carefully examine the PPMC projections, which are

presented in a sequence and format suitable for break-even

calculation and analysis. After you calculate the break-even point, use

additional, publicly available information to come to a decision with

respect to market potential. The increase in the price per share of

PPMC stock suggests that, over time, the market may have reacted to

their results and analyses, using a comparable methodology.

2.1 Recognize the PPMC projections and the data associated with it in the presented case Case 1: Purchase Point Media Corporation (PPMC)


Case Background

Purchase Point Media Corporation (Pink Sheets: PPMC) is what some

refer to as a thinly traded “corporate shell.” The firm held patents in

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the United States, Canada, United Kingdom, and Germany for a

shopping-cart display device, but was a nonreporting and

nonoperating entity.

On March 18, 2002, PPMC reported its intention to sell these patents

and related trademarks. The initial estimates suggested a stock price

of nearly $2.50 per share, before related per-share deductions for

sale-related broker’s commissions and legal fees. At the time of the

news release, the firm’s stock was trading at $0.04 per share. In less

than 60 days the stock was trading at more than $0.60 per share

(Cataldo 2003, 55–60), for a 1,400 percent increase in price per

share. (Note that investors and speculators alike would view this as a

very risky investment, and the price per share for PPMC stock would

be expected to fall short of or sell at a significant discount to the

“anticipated” selling price for the firm’s intangible assets. See Arbel

and Strebel 1982 and 1983; Arbel, Carvell and Strebel 1983; and

Arbel 1985 for guidance on thinly traded or “neglected” firms.)

While this initial news release attracted speculators, causing the stock

price to rise, after months without any additional news releases, the

stock price drifted down again. On August 20, 2003, PPMC again

announced its intention to sell the firm’s intangible assets (Business

Wire 2003).

In the second announcement, PPMC management referred interested

investors to their corporate Web site. Among the data provided, PPMC

included a financial projection and other items they felt might be of

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interest to potential purchasers of the firm’s intangible assets (see

Exhibit 1, Purchase Point Media Corp. statement, which follows).

To begin this case, review and comment on the “form” of the public

disclosure circulated by PPMC. Then use the “substance” of this

information to develop per-unit, sales-based contribution margins and

break-even points for the first year of operations. Last, gather other

publicly available information to determine the market feasibility of

achieving its break-even point.


Projected Statement of Net Income

For the first twelve months of operations

Safe harbor statement under the private securities litigation act of

1995. This project statement of net income contains forward-looking

statements, all such forward-looking statements are by necessity only

estimates of future results and actual results achieved by this

company may differ materially from these statements due to a number

of factors. Both the Corporate house and Purchase Point Media Corp.

assumes no obligation to update these forward-looking statements to

reflect actual results. Changes in assumptions or changes in other

factors affecting such statements. You should independently

investigate and fully understand all risk before making investment


Suite 100 -141 5th Ave., New York, NY. 10010

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Purchase Point Media Corp., 141 5th Ave., Suite 1100, New York, NY


Attention: Albert Folsom

Dear Sirs:

We have prepared the attached Projected Statement of Net Income

for a twelve Month period for Purchase Point Media Corp., (The

Company”) from information supplied to us by management and from

various other periodicals and reports. These figures do not include

start-up and development costs.

We have made basic assumptions in compiling the information given

to us in that revenue will commence to be generated once the

Company’s patented display panels have been installed in 1,200

stores, and a total of 1,200 stores subsequent to the first month will be

added to the Company’s list of clients each month thereafter for a total

of 14,400 stores in year one.

The Projected Statement of Net Income has been prepared in

accordance with generally accepted accounting principles except that

no consideration has been given for Federal and State taxes which,

had the taxes been calculated at the statutory rates in effect, would

have had an impact on net income.

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If the Company decides to remain with only 14,400 stores during its

second year of operations and does not expand at all, projected gross

revenue will increase to approximately $150,000,000.

If you have any questions regarding the above please feel free to

contact us at any time.

Yours very truly; Corporate House

Per: /S/ _________________

Richard T. Hethey, Director, Attachment



1. Advertising Revenue It is expected a minimum of 14,400 stores

will be using the Company’s unique display panel by the end of

the first year. The Company expects to affix its display panel on

100% of the grocery carts or the equivalent of 200 carts per


Month Number of Stores at End of the Month Gross Advertising Revenue Monthly

Gross Advertising Revenue by Quarter

(i) (ii)

1st 1200 1,620,000

2nd 2400 3,240,000

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3rd 3600 4,860.000

$ 9,720,000

4th 4800 6,480,000

5th 6000 8,100,000

6th 7200 9,720.000


7th 8400 11,340,000

8th 9600 12,960,000

9th 10800 14,580,000


10th 12000 16,200,000

11th 13200 17,820,000

12th 14400 19.440.000


Total $ 126,360,000

i. As mentioned above, 14,400 individual supermarkets have

been selected for the first year of operations. The estimate

assumes 1,200 new stores each month subsequent to the

initial opening of 1,200 stores in the first month. The

Company required a minimum of 300 stores in the first

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month to qualify for contracting with advertising agencies

since they require a $5,000,000,000 annual sales figure from

the companies they will be advertising with.

ii. Statistics indicate there are on the average 60,000

customers per month shopping at any given supermarket in

the United States. The cost to the advertiser is $2.25 per

1,000 customers, which equates to $135.00 per month for

display on the advertising panels. The advertiser is under a

quarterly contractual agreement. With 10 advertisers on a

display panel each supermarket will provide a gross revenue

of $1,350 per month. With 1,200 stores coming on stream in

the first month, the total gross revenue is projected at


2. Amortization of Display Panels The display panel is

manufactured using an injection mold process. The end product

is made of heavy durable plastic. In addition to the display panel

itself, fastenings are an integral part of the assembly of the panel

on the grocery cart. Total manufacturing and installation cost is

$6.22 per display unit.

It is assumed the display panel will be affixed to 100% of the

carts in the supermarket. Statistics show the average

supermarket uses 200 grocery carts. Therefore, 200 carts will

have the Company’s panel installed. It is assumed the panels will

have a life expectancy of 5 years or longer. The total cost in the

first year of operations is $17,913,600. For conservative

purposes, amortization of the display panels is taken over a two-

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year period rather than a five-year period. Assuming a two-year

amortization based on the straight-line method, the annual

expense will be $8,956,800. Therefore, in the first year, each

quarter will bear the cost of $2,239,200

3. Printing of Inserts The advertising agreement with an advertiser

will be for a three-month period after which the advertiser is free

to renew or discontinue the service. If one advertiser decides not

to renew the agreement or is willing to renew but wishes to use

another product, the entire insert must be reprinted. This

assumes that every quarter a new set of inserts must be printed.

The cost to print each of the inserts is $0.11, which covers freight

and spoilage. The figure of $0.11 is conservative based on

quotes received by management which indicates 300,000 inserts

can be printed on #50 Smooth White Offset paper in four colors

one side process for $8,454 or $0.03 per insert. The following

analysis determines the expense each month and by quarter for

printing charges.

Month New Grocery Carts With Advertising Renewal Printing

Total Per Month

Quarterly Total


1st 240,000 – 240,000

2nd 480,000 – 480,000

3rd 720,000 – 720,000 1,440,000


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4th 960,000 240,000 1,200,000

5th 1,200,000 240,000 1,440,000

6th 1,440,000 240,000 1,680,000 4,320,000


7th 1,680,000 240,000 1,920,000

8th 1,920,000 240,000 2,160,000

9th 2,160,000 240,000 2,400,000 6,480,000


10th 2,400,000 240,000 2,640,000

11th 2,640,000 240,000 2,880,000

12th 2,880,000 240,000 3,120,000 8,640,000


Total 20,880,000 $ 2,296,000

4. Replacement Due to Vandalism Regardless of the security

precautions taken by the individual supermarkets, vandalism, and

theft will occur. This will represent a cost to the Company since it

cannot be charged to either the supermarkets or advertisers.

Management is currently seeking insurance, which will lessen

this expense, but for conservative purposes, no consideration has

been given to recovery of these costs by way of insurance


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It is estimated vandalism will affect 5% of the display panels. This

is relatively high but until facts are known a conservative

approach has been adopted. Vandalism will occur in two different

fashions: first, by placing graffiti on the display unit and, secondly,

by smashing the unit in some way. Both will result in the

replacement of the unit. No consideration has been given for

grocery carts that have been stolen from the supermarkets since

until the cart is located no replacement of the display unit will

occur and might not be required.

The panels are fully recyclable and therefore will have the effect

of reducing the overall cost of manufacturing the pane. No

recovery from this source has been considered in this projection

of net income during the twelve-month period.

Since there are 2,880,000 panels installed at the end of the first

year, this would mean 144,000 would require a replacement

panel. Assuming an even distribution by quarter over the year,

each quarter would result in 36,000 panels being replaced at a

cost of $223,920 and the printing of inserts will add an additional

cost of $3,960 for a total replacement cost of $227,880.

5. Cart Rentals to Supermarkets The Company will enter into a

five-year contract with each supermarket chain to ensure

longevity for its advertisers. Under this contractual commitment,

the Company will pay the supermarket chains 10% of the gross

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revenue each quarter for the rental of space on a grocery cart.

6. Marketing, Sales, and Commissions The Company has

contracted with a media company to handle all marketing

materials and advertising, their budget for the first year is

$2,500,000. And has contracted with an advertisement sales

company that is responsible for booking the advertisements, their

budget for the first year is $2,000,000. The Company has allowed

for a 15% Commission to be paid to the advertiser in the form of

a discount or in some cases paid to their ad agency of record.

Quarter Marketing & Advertising Bookings Adverstisers

15% Commissions Total

1st $ 625,000 $ 500,000 $ 1,458,000 $2,583,000

2nd 625,000 500,000 3,645,000 4,777,000

3rd 625,000 500,000 5,382,000 6,957,000

4th 625,000 500,000 8,019,000 9,144,000

$ 2,500,000 $2,000,000 $18,954 000 $23,454,000

7. Grocery Store Operations The Company has contracted with

ITG Retail Services Group LLC., a company that has

relationships with most of the leading grocery chains in North

America. ITG’s responsibilities include signing up the various

grocery chains (see note 5 above), installing the advertisement

display device and changing the advertisements inserts. The cost

to perform this service is as follows:

Signing up the store $ 1.00 per cart

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Per annum, store contract fee $0.50 per cart

Installation of Ad Holder $2.00 per cart

Changing the Advertisement $0.50 per cart

Based on 240,000 carts being commissioned each month from

1,200 new stores being introduced into the system, there is a

charge for signing up the stores of $240,000 per month or a

quarterly charge of $720,000.

Based on a per annum store contract fee for the number of carts

employed each month, there is a charge of $120,000 per month

or $360,000 per quarter.

The installation of Ad Holders is $2.00 per cart. With 1,200 new

shores using the Company’s advertising system each month and

each store has 200 shopping carts in use this results in 240,000

installations each month. This would result in $480,000 being

paid each month to the Distribution company performing this

service for the Company.

It is estimated that advertising will be changed on a quarterly

basis. As noted above the cost to change the advertisements is

estimated at $0.50 per Ad Holder. The following represents the

cost to change the advertisements:

Month Number of new Cart at End of Month

Number of new Cart to be Changed Each Quarter

Monthly Cost to Change Advertising

Gross Quarterly Expenses

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lst 240,000 – –

2nd 240,000 – –

3rd 240,000 – –

$ –

4th 240,000 240,000 120,000

5th 240,000 240,000 120,000

6th 240,000 240,000 120,000


7th 240,000 480,000 240,000

8th 240,000 480,000 240,000

9th 240,000 480,000 240,000


10th 240,000 720,000 360,000

11th 240,000 720,000 360,000

12th 240,000 720,000 360,000



The total cost of maintenance and service each quarter based on

the above figures is as follows:

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Quarter Signing up Fee

Store Contract Fee

Installation of Ad Holders

Changing of Adverstisements

Total Expenses

1st $ 720,000

$ 360,000 $ 1,440,000 $ – $2,520,000

2nd 720,000

360,000 1,440,000 360,000 2,880,000

3rd 720,000

360,000 1,440,000 720,000 3,240,000

4th 720,000

360,000 1,440,000 1,080,000 3,600,000

TOTAL $2,880,000 $ 1,440,000 $ 5,760,000 $ 2,160,000 $12,240,000

8. Accounting and Audit The accounting functions required are as


Ensuring the revenue derived from each advertiser and/or ad-

agency is received and deposited on a timely basis;

Administering monthly payroll, creditor invoices and expense


Preparation of quarterly financial statements to meet listing

requirements; and

Ensuring adherence to budgetary requirement.

It is assumed an accountant will be hired initially to set up the

accounting, payroll and other office functions. This person will be

paid $6,000 per month, which will include the preparation of all

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filings with regulatory bodies. It is assumed a junior clerk will be

hired in the last quarter to assist with filing and other work around

the office. This junior clerk might be a part-time accountant

initially and later in the second year would be hired full time.

Salary compensation for this clerk will be $2,000 per month in the

last quarter. Therefore, the first three-quarters will bear a cost of

$ 18,000 and the last quarter will have a cost of $24,000. In

addition, to the estimate of salaries, the will be a cost for the

year-end audit to meet the listing requirements of regularity

bodies. It is estimated this audit will cost the Company

approximately $15,000.

9. Advertising The Company will advertise extensively in trade

journals, newspapers and other media such as the following:

Leasing top 10 Advertisement Agency magazines in the United

States which specialize in the food and grocery industry and are

distributed to the top Ad-Agencies monthly;

Packages of advertising material to the top of grocery store

chains in the country;

Brochures and pamphlets will be sent to the 3 top executives in

35 grocery chain stores in the United States;

Advertising packages will be sent to the top 100 food

manufacturing companies which will be directed towards the

advertising executives;

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Other media to be identified as required.

The cost of printing and assembling of brochures and pamphlets

is estimated to be $35.00 each. A minimum of 1,500 brochures

will be used during the first year for a total cost of $52,500. For

simplicity, this cost will be spread evenly over the four quarters.

Advertising in magazines and periodicals is a major cost but this

form of advertising will alert advertisers and their agents to the

services being offered by the Company. It is estimated each

article in a magazine will cost approximately $3,500. If

advertisements are placed in the top 10 Ad-Agencies magazines,

each results in a monthly cost of $35,000 or $105,000 for each

quarter. Total advertising costs for each quarter, including

brochures and pamphlets, is $118,125.

10. Automobile Expenses Automobiles will be leased for the top

three Executives at $6,000 per quarter.

11. Bank Charges Bank charges will represent the transfer of funds

from various advertisement agencies in payment on behalf of

their clients, monthly service charges, etc. It is assumed this cost

will be $500 per quarter.

12. Entertainment and Promotion Entertainment and promotion

mainly covers the cost of “wining and dining” advertisement

agents and other media personnel and on occasion holding

seminar-style meetings. Since money must be spent in this area

to create a willingness to use the Company’s display panels, it is

estimated that $10,000 a month will be allotted. This results in

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$30,000 a quarter.

13. Insurance Insurance coverage will have to be obtained for

general liability, office contents, directors’ liability insurance and

gross profit protection. Additional insurance will be carried for

protection in the event a malfunction of the display unit causes

harm. The chances of this ever happening is extremely remote.

Insurance coverage is estimated $25,000 per quarter.

14. Legal Legal costs are associated with preparation of advertising

contracts with the supermarket chains, advertising agencies and

advertisers themselves as well as employee contracts and

various other contracts as required. In addition, legal services will

be needed for the filing of the documents with the regulatory

bodies. Legal expenses will vary depending upon the needs of

management. For conservative purposes, legal expenses have

been assumed at $10,000 per month or $30,000 per quarter.

15. Management Fees Management fee comprises the following


Position Annual Remuneration Quarterly Remuneration Monthly

President $ 120,000 $ 30,000 $ 10,000

Vice-President – Marketing 9,000 22,500 7,500

Treasurer/Controller 80,000 20,000 6,667

Total $ 290,000 $ 72,500 $ 24,167

16. Office and Sundry Office and sundry expenses comprise

photocopying paper, office supplies, envelopes, binders, coffee,

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pens and pencils, computer tapes and paper, postage, filing

cabinets, adding machines and other items of lesser dollar value

which are normally required in an office. Initially, the cost of

starting two offices; one in the eastern part of the United States

and the other in the western part, which will require a greater

outlay than in subsequent months. Therefore, the following has

been budgeted by quarter:

First Quarter $ 15,000

Second Quarter $ 9,000

Third Quarter $ 12,000

Fourth Quarter $ 15,000

17. Public Relations Public relations are a high priority for

management. Public relations firms will be hired to search for new

institutional investors and to prepare the required information to

be circulated monthly to current and potential shareholders.

There will be a constant need to inform the public-at-large and

private institutions of the Company’s achievements and its

direction in the future. It is projected, as a minimum, the quarterly

charge for public relations will be approximately $100,000. In

future years with more stores being added to the client base, the

public relations budget will be increased substantially.

18. Rent The Company will require two offices; one located in the

East and the other located in the West. The offices will not have

to be large in space since limited personnel will be required to

manage the operations. Nevertheless, the executives will each

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require an office, a boardroom for meeting customers and

advertising agents, an office for accounting, a reception area,

storage facilities and a general working area. The building does

not have to be a class A rating and can be located outside of the

busier section of a city. Therefore, estimated rent expenses each

month will be $5,000 for each of the two buildings for a total of

$10,000 per month.

19. Salaries and Benefits The accountant’s and assistant

accountant’s salaries have been covered under Accounting and

Auditing noted fewer than 8 above. There are employees other

than the aforementioned; being two receptionists, two girl fridays

and two account representatives to sell the advertising. Other

employees will be hired either on a part-time basis or else as

demand requires. The estimated cost of the above-noted

employees is as follows:

Personnel Monthly Salary (i)

Employee Benefits (ii)

Total Quarterly

Executive Secretary $ 3,000 $ 600 $ 3,600 $ 10,800

2 Girl Fridays $ 4,000 $ 800 $ 4,800 $ 14,400

2 Receptionists 3,000 600 3,600 10,800

2 Account Representatives 10,000 2,000 12,000 36,000

Total $ 72,000

(i) Monthly salaries are distributed as Fallows:

Executive Secretary $ 3,000 per month

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Girl Friday $ 2,000 each per month

Receptionist $ 1,500 each per month

Accountant Representative $ 5,000 each per month

(ii) It is assumed employee benefits will be 20% of the salaries

paid. The type of benefits available to the employees will be

dental, extended health and life insurance. The Company will

absorb one half the cost and the employees will be responsible

for contributing from their salaries the balance.

20. Stationery and Printing Office stationery will be purchased

during the first quarter in sufficient quantities to last the entire

year. Said cost is estimated at $10,000. Printing expense will

comprise mainly office photocopying since the brochures and

pamphlets are covered in section 9 – Advertising above and the

inserts are covered under section 3 – Printing of Inserts.

21. Telephone and Fax Telephone and fax charges will be relatively

constant over the year. For conservative purposes, telephone

charges for the two offices are estimated at $3,500 per month or

$10,500 per quarter.

22. Travel and Accommodation Travel cost for the executives and

account representatives is relatively high due to the nature of the

business. Initially, the main travel will be based in the United

States but eventually, consideration will have to be given to

extending travel to include the European countries where the

Company has obtained patent protection for its display panel. It is

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anticipated this will occur in the last quarter of the year. As the

year progresses, traveling in the United States will increase.

Therefore, it is anticipated travel costs will be $10,000 a month

for the first quarter, increasing by 100% for each of the second

and third quarters. In the last quarter, it is anticipated to travel

locally in the United States will amount to $35,000 per month with

the added cost each month of trips to Europe. The European trips

are estimated to add an addition $10,000 per month to the travel

costs. Therefore, travel costs by quarter are calculated as


First Quarter $ 30,000

Second Quarter 60,000

Third Quarter 90,000

Fourth Quarter 135,000

These attached schedules are an integral part of

this Projected Statement of Net Income

Supplemental Information

Brand Name versus Generic Stocks

Brand Name Stocks Generic Stocks

Less information risk More information risk

Higher quality of information Lower quality of information

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Large sample of consensus estimates Small or no sample of consensus estimates

Monitoring service or fee No monitoring service or fee

Lower return Higher return

Higher price (premium) Lower price (discount)

Lower uncertainty Higher uncertainty

More consistency Less consistency


Supplemental information is provided in. The first graph illustrates the

price per share for PPMC common stock for the time period August

20, 2003, through September 27, 2004. The latter date represents the

specific event when PPMC filed their 10QSB. The second graph

compares the PPMC price per share with comparable index

measures, such as the Dow Jones Industrial Average, Standard and

Poor’s 500, NASDAQ, and Russell 2000 indices, for the same period

of time.

An image of a graph depicting the price per share for PPMC common

stock, August 20, 2003 through September 27, 2004, when PPMC

filed their 10QSB.

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The price per share for PPMC common stock, August 20, 2003

through September 27, 2004, when PPMC filed their 10QSB

An image of a graph depicting the comparison of the PPMC price per

share over comparable index measures, such as the Dow Jones

Industrial Average, Standard and Poor’s 500, NASDAQ, and Russell

2000 indices, for a period from August 20, 2003 through September

27, 2004.

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Comparison of the PPMC price per share over comparable index

measures, such as the Dow Jones Industrial Average, Standard and

Poor’s 500, NASDAQ, and Russell 2000 indices, for the same time



Arbel, A. 1985. Generic Stocks: An old product in a new package. The

Journal of Portfolio Management 68: 4–13.

Arbel, A., Carvell, S., and Strebel, P. 1983. Giraffes, Institutions and

Neglected Firms. Financial Analysts Journal 39: 57–63.

Arbel, A., and Strebel, P. 1982. The Neglected and Small Firm

Effects. The Financial Review: 201–18.

Arbel, A., and Strebel, P. 1983. Pay attention to neglected firms! The

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Journal of Portfolio Management 9: 37–42.

Business Wire. 2003. Purchase Point Media Corp.: Corporate Update

(August 20).

Cataldo, A. Information Asymmetry: A Unifying Concept for Financial

and Managerial Accounting Theories (including illustrative case

studies). Studies in Managerial and Financial Accounting 13, 2003.

Oxford, England: Elsevier Science (JAI). Series Editor: Marc Epstein.

Project Requirements

The project requires three steps to be presented.

Step 1 – Identify Form and Substance Errors.

Step 2 – Compute the Purchase Point Media (PPMC) break-even

points in terms of carts and stores.

Step 3 – Determine the number of grocery stores for various food


In one Word document, provide individual sections for each Step. This

Word document along with the Excel file (described below for Step 2)

will be uploaded when you click on the Take Exam button on your

Student Portal to submit your project (described under the “Submitting

Your Assignment” later in the instructions).

This Senior Capstone project highlights your knowledge and the skills

you have developed over the course of your education. There is

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nothing “new” to be learned here.

The knowledge and skills required for this project include English

Composition, Financial Accounting, Managerial Accounting,

Information Literacy and the abilities to think critically, do research and

to present your work in a professional manner.

If you are unsure or don’t understand something about the project,

then go back to your previous subjects to review. For example, if you

don’t remember how to make a proper citation, then revisit your

English Composition to see how to make a correct citation. Or, if you

don’t remember how to calculate a break-even point, go back to

Managerial Accounting and review the subject matter pertaining to

that concept.

Remember, there is nothing “new” here. Everything about this project

you should already know how to do.

Substance Versus Form and Critical Thinking

Step 1

In the infamous Enron bankruptcy case, the form of the financial

statements prepared by the Enron Corporation and WorldCom was

very professional; however, the substance was lacking, leading to

audit and market failures and the eventual bankruptcy of both of these

big-cap, or large capitalization firms. PPMC represents a reverse

case, in which the form of the data contained in the PPMC news

release and corporate Website was very poor.

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To begin, read the PPMC report, focusing on problems with the form

of the report. (“Form” means spelling, punctuation, and capitalization

are correct and that the text is grammatically correct. Also, form

means that the format of the text as far as font, bold, underlining,

indents, and so on are correct.) Prepare a typed, clearly

communicated summary of all errors or weaknesses you find in the

form of this report. This should be a numbered list. There are well over

30 form errors in the document. (The ways to go about doing this for

this step is to think of yourself as an English Composition instructor

and a student has turned in a required paper that was written.)

Although the PPMC report isn’t well-written, don’t attempt to rewrite

the report. Only present a numbered list of the errors found.

To report the numbered list of form errors for this step, each error

should have three components:

1. The location of the error.

2. What the error is.

3. How the text should have been written correctly.

Here is an example of how you’ll present the form errors.

Summary of Errors in the Form of the PPMC Report

1. Location:

The first page of Exhibit 1, the last sentence of the first paragraph

states “You should independently investigate and fully

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understand all risk before making investment decisions.”


The word risk is singular. It should be plural.


It should have been written, “You should independently

investigate and fully understand all risks before making

investment decisions.”

Next, reread the PPMC report, focusing on problems with the

substance of the report. (“Substance” means the figures and data that

are being reported and making sure the math is correct.) Identify the

obvious errors or problems first by focusing on the addition or math

errors. Prepare a typed, clearly communicated summary of all the

errors you find in the substance of this report. These should be

presented in a numbered list.

To report the numbered list of substance errors for this step, each

error should have three components the same as the presentation of

the form errors:

1. The location of the error.

2. What the error is.

3. How the text should have been written correctly.

The heading for the substance errors should be “Summary of Errors

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in the Substance of the PPMC Report”.

Do not take this step lightly. The data and figures found in the report

are used to calculate the break-even analysis for Step 2. As

presented, the data is incorrect and therefore, the break-even analysis

would be incorrect. Therefore, it is important that you find “all” of the

substance errors and correct them as these corrected figures will be

what you use to make the break-even calculations for Step 2.

Step 2

The PPMC Notes in the document appear to be organized by cost

behavior. This is similar to the approach you used in your Managerial

Accounting course. You should follow this approach or framework as

you compute the PPMC breakeven point in terms of carts and stores.

Begin with revenues, follow with variable costs (VCs), develop the

contribution margin (CM; in aggregate), followed by fixed costs (FCs),

and, finally, compute PPMC’s net operating income (NOI) and break-

even point in terms of both carts and stores.

At the beginning of the assignment, on the right-hand side under

“Optional Study Materials” select the “PPMC Excel Spreadsheet”

menu item to download the required Excel spreadsheet.

Step 2 requires that you calculate the break-even points for both carts

and stores. Download this file and use it to calculate the breakeven


Reference the Excel spreadsheet for Step 2 in the Word document

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and include the spreadsheet as a separate file when submitting the

project. The spreadsheet for the calculations is too large to include in

a table in a Word document or be able to read if an Excel spreadsheet

is inserted. Therefore, there should be two files submitted for the

project – this Word document and the Excel spreadsheet with your

work for Step 2.

The majority of the work has been done for you when using the

spreadsheet. The setup to be able to calculate the CM, NOI and the

break-even points are part of the spreadsheet. What you need to do to

interpret the Notes from the PPMC document, input the data into the

spreadsheet (be sure to use your “corrected substance” figures/data

from Step 1), and do the calculations required to obtain the break-

even point for the carts and the break-even point for the stores. (Hint:

Some cells in the spreadsheet have comments inserted. Pay attention

to these comments. For example, there is a comment in a cell that has

the formula to be used to calculate the break-even point.)

Step 3

Step 3 requires three items:

1. The ticker symbol for the store chain.

2. The number of stores for the store chain.

3. A Works Cited page for the figures found as the number of


Table 1 should be reproduced as a table in your Word document for

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Step 3 and the ticker symbol and the number of stores inserted from

your own research.

To find the ticker symbol for each of the store chains, it is as easy as

opening up Google Chrome as your web browser and typing in the

store name followed by “ticker symbol” into the search box. The hits

form the search should reveal the ticker symbol for that store.

Alternatively, you could use a financial website such as Yahoo

Finance, E-trade, and so on to do your searching. All of the stores

have a ticker symbol with the exception of one which is a private


Using your own research skills and abilities, determine the number of

grocery stores for each store chain. How you go about doing this is up

to you and your research skills.

Here is what you are looking for as far as the number of stores is


You are looking for the most “current” information. However,

current doesn’t mean today.

For example, if store A (which has 10 stores) took over store B

(which had 3 stores) in a merger, then B is no longer in business.

The number of stores for A will be 13 as of today because it is still

in business. The number of stores for B will be 3 which is how

many it had before the merger. That is the most current for B –

not zero.

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As another example, if a store declares bankruptcy, it all depends

upon the bankruptcy status. If the store is in Chapter 11, which is

reorganization then the number of stores will be the current

information. If the store is in Chapter 13, which is a closing of the

business, then the number of stores will be zero.

Be aware that the solution to the number of stores in the table is

kept current, but that doesn’t mean that data will all be “as of

today.” It is possible that the most current information might be

2015 or 2016. It all depends upon your research and what is

available. Finding the correct information is the purpose behind

doing research.

One other thing to watch out for in doing your research is a

“name change.” If a store changes its name, then list both the old

name and the new name and the current information available for

the number of stores.

You should rarely use third-party sites such as Google Finance,

InvestSnips, Investopedia, Wikipedia, newspaper articles, and so

on as these don’t have the most current and accurate information.

You should use information from the business website, SEC

filings, Annual Reports, and so on for the most applicable,

relevant and current information.

Lastly, this step involves research. “Research” is not doing a

quick search and picking a website or two and going with what is

found. Research is looking at quite a few sources and thinking

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critically about what is found as to relevancy, currency, and

accuracy. For example, one web page may say “about 500”

stores, but, another page on the website will say “536 stores”

exactly. Or one website might have information from March 2016

and another might have information from December 2016. Which

is more current and relevant? The December 2016 web site. Not

only do you need to do research, but, you also must think

critically about the information you find.

Along with Table 1, a Works Cited page needs to be included for Step

3. This is Standard English Composition. Work and/or figures that are

not your own need to be cited as part of a paper.

If no citations are provided or the citations are not properly formatted,

this becomes “Plagiarism” which is unacceptable at Penn Foster or in

the workplace.

There should be a correctly formatted citation for each figure for

the number of stores for the grocery store chain. This is standard

for English Composition and should follow APA formatting. If you

do not remember how to make a properly formatted APA citation,

go to the Purdue OWL (Online Writing Lab) website by doing the


do a search on the Internet for “Purdue OWL” and go to the


in the menu on the left, click on “Research and Citation”

from the drop-down menu click on “APA Style”

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then click on “APA Formatting and Style Guide”

finally, select “Reference List: Electronic Resources

Alternatively, you can telephone and speak to an English Instructor.

The web address provided for the citation should take the reader

directly to the web page where the number of stores can be

found. The reader should not have to search for your information.

Do not provide a generic web address such as the homepage of

a website unless the actual number of stores is on that web page.

Table 1

Stock Ticker No. of Stores Firm Name

KR Kroger

ABS Albertson’s




Winn-Dixie Stores

Publix Super Markets

Great Atlantic & Pacific

Smart & Final

Ingles Markets

Blue Square-Israel

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Whole Foods Market

Weis Markets

Marsh Supermarkets

Nash Finch

Fresh Brands

Wild Oats Markets

Spartan Stores

Eagle Food Centers

Gristede’s Foods

Village Super Market

Foodarama Supermarkets

Arden Group


Writing Guidelines

Refer to the “Submitting Your Work” section at the end of this book for

details on submission requirements for the PPMC Case assignment.

Grading Criteria

Your assignment will be evaluated according to the following criteria:

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Content 80 percent

Written Communication 10 percent

Format 10 percent

Criteria Grade

Content 80 pts

Identifies Form and Substance errors as instructed (worth 30 points) Completes Step 2 – Compute the PPMC break-even point in terms of carts and stores (worth 40 points) Completes Step 3 – Determine the number of grocery stores in the United States (worth 10 points)


Written Communication 10 pts

Answers each question in a complete paragraph that includes an introductory sentence, at least four sentences of explanation, and a concluding sentence Uses correct grammar, spelling, punctuation, and sentence structure Provides clear organization by using words like first, however, on the other hand, and so on, consequently, since, next, and when Makes sure the paper contains no typographical errors Properly formatted citations – (No Works Cited or incorrectly formatted citations will result in a final grade of 1 for the project due to Plagiarism.)


Format 10 pts The paper is double-spaced, typed in font size 12, and contains properly formatted Internet research sources. It includes the student’s

Name and address Student number, Course title and number, and project number


Total Grade %

BUS450 Discussion Board 2


Below are important details about the online discussions that will allow

you to interact with other students and faculty members. This

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interaction can greatly benefit anyone studying online. By participating

in these interactions, you can learn from and encourage others while

progressing through your studies.

Note: Once you access a discussion board on your student portal, you

may be unable to return to your portal or access your course materials

until you post a response to the discussion board. You can return to

the discussion board later to edit your post once you’ve had a chance

to review your course materials.

1. Access a Discussion Board on your student portal.

2. Choose a User Name. (It’s suggested that you use your first and

last name.)

3. Pick the major word or words as your subject, type in your

response, and then click on Create New Message to post your


4. Once you’ve posted your initial response, you’ll be able to see

your classmates’ responses. You need to respond to two (2) of

your classmates.

5. After you have chosen and clicked on your classmate and

decided this is the one you want to respond to, click on Post a

reply to this message.

6. Type your response and click on Post Reply to Board.

Remember, you must respond to two (2) other students.

Note that the discussion board system will automatically time out after

20 minutes, and any unsaved work will be lost. It’s highly

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recommended that you write your answers to the discussion board

prompts in a Word document, and then copy and paste your answers

into the discussion board window when you’re ready to submit.

What Are the Requirements?

1. The day you receive the course materials marks the start of your

first lesson. At this time, you should introduce yourself to your

classmates and instructor. Please be sure to return to the

discussion to welcome others.

2. Thereafter, for each prompt, you are required to complete the

readings and then answer the prompts for the lesson that you’re

completing. Your answer to the discussion prompt should be at

least five (5) to seven (7) fully-developed sentences.

3. You must also read the posted answers from other classmates

and select two (2) of those other posts. You will then respond to

those two posts by commenting on them academically. These

responses are known as peer responses. Each of the two peer

responses needs to be at least five (5) to seven (7) fully-

developed sentences.

4. The discussion questions are based on the course material

you’re studying. However, you should also expect that you will

need to conduct some outside research when developing your

answers and peer responses. All postings are expected to be in

well-developed paragraphs with proper sentence structure and


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How Are the Discussion Posts Evaluated?

Answers to the posted questions and peer responses that do not meet

all of the mentioned requirements will not count toward the grade.

Additionally, use the following rubric to assess and improve your

postings before putting them on the discussion board.


Timely Student shares in the discussion boardand posts a main post and two replies. Student does not post.

Collaborative and Significant

Positive responses to the work of others with pertinent and original insights. No attempt to dominate conversation. Multiple postings on same topic contribute to the flow of conversation.

Offers inadequate responses to the comments of others; short or without new ideas. Posting does not advance the substance of the conversation. One or fewer postings per assignment.


Includes analysis or synthesis of course materials, own experience, and/or colleagues’ postings. Includes citations to external materials of high academic quality (peer reviewed). Thoughtful, academic and stimulating. Pertinent to the assigned topic and also brief.

No evidence of cognitive processing of course material nor of analyzing own experience through the lens of course materials. Posting isn’t directly relevant to assignment.

Clarity, Grammar, and Spelling

No errors. Statements always comprehensible.

More than four errors that impede understanding.

When Are the Discussions Graded?

Grades are automatically posted; however, instructors are monitoring

the boards and will reach out to you when a posting grade is being


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What If I Fall Behind on My Postings?

You will not move onto your next class until all discussions are

complete. If you earn an F on a discussion, it is asked that you follow

the email instructions received from your instructor and that you redo

the discussion.

How Can I Contact the School?

You can email instructors through the Contact Us link when logged

onto the Penn Foster website.

PPMC Excel Spreadsheet


Click the link to download the PPMC Excel Spreadsheet

PPMC Excel Spreadsheet (

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  • Lesson 2 Overview
  • Case Background
  • Supplemental Information
    • Brand Name versus Generic Stocks
  • Graphs
  • References
  • Project Requirements
  • Substance Versus Form and Critical Thinking
    • Step 1
    • Summary of Errors in the Form of the PPMC Report
    • Step 2
    • Step 3
  • Writing Guidelines
  • Grading Criteria
    • What Are the Requirements?
    • How Are the Discussion Posts Evaluated?
    • When Are the Discussions Graded?
    • What If I Fall Behind on My Postings?
    • How Can I Contact the School?