Case 1: Purchase Point Media Corporation (PPMC)
INTRODUCTION
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 informa- tion 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.
OBJECTIVES
When you complete this case, you'll be able to
- Identify discernable errors, irregularities, and impropri- eties in style and format within publicly reported data
- Meet financial statement presentation requirements for a specific "real world" example
- Determine whether financial information provided follows generally accepted accounting principles (GAAP) or is presented in "good form"
- Distinguish between the substance and form of financial statements
- Estimate variable and fixed costs for a publicly traded company
- Assess publicly disseminated information from publicly traded companies to determine the feasibility of market potential and market penetration
- Exercise enhanced critical-thinking skills
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 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 sug- gested 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 intan- gible 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 interest to potential pur- chasers 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.
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 chains.
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 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.
Attachment:- Case.rar