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Net Present Value analysis of proposed strategy?s new cash flow and EPS/EBIT analysis NOTE: To construct the first cash flow (cf1) at the very minimum, the new revenue from your strategy(s) must be discounted back to the present value by calculating EBIT and that figure will be your cfn for each year. cf0 (initial cost of your strategy), cf1 (discounted cash flow first year), r (opportunity cost of capital, the rate of the next best alternative use of cash/debt/equity resources).

NPV=-cf0+ cf11+r1+cf21+r2+cf31+r3?cfn1+rn

I have attached the financial statements that have the recommended strategy.  

Running head: JOHN WILEY & SONS, INC. CASE STUDY John Wiley & Sons, Inc. Case Study 2


Sekou Fofana


Alice Helms


Megan Howard


Nicholas Walker


Liberty University


December 06, 2016 JOHN WILEY & SONS CASE STUDY 2 John Wiley & Sons, Inc. Case Study 2


Executive Summary


John Wiley & Sons, Inc. is an organization which provides solutions and tools in three


core businesses; research, education and professional arenas. The tools include journals,


databases, lab protocols, references, etc. Wiley & Sons, Inc. has content for all major academic


and professional fields which provides research material for more than 800 societies with


millions of members. The organization creates products and services to assistance and or


enhance education and the workplace, which correlates with success. The professional


development component of Wiley & Sons meets the needs of business that are top of their class


by providing best practices and strategies to their employees to create innovative and effective


business practices. The products and services range from accounting, to technology, to


behavioral health to name a few. In the education component of Wiley & Sons, the company


provides services for undergraduate and graduate programs, in addition to other education




Existing mission, objectives, and strategies


Wiley & Sons, Inc. began its company as a printing and publishing establishment. After


nearly two centuries, the organization has expanded the realm of publishing for others into a


global brand. The organization now foster publishing for research, education, and professional


development tools. The organization distinguishes itself from other organizations due to its


stellar customer service, variety of strategies and tools, and plethora of subject matters. Not only


does Wiley & Sons, Inc. pride itself on products and services provides to its clients, it also prides


itself for being an outstanding employer. According to Wiley & Sons Inc.?s website (2016), the


organization is ?an equal opportunity employer, committed to attracting and retaining a talented


and diverse workforce that enables us to compete effectively in a global marketplace. We are JOHN WILEY & SONS CASE STUDY 3 further committed to fostering a work environment in which all colleagues are valued and given


opportunities to enjoy professional success.? The organization has a focus on quality and


commitment to clients and has done so since 1807.


New mission statement


Wiley & Sons Inc. is an organization that serve a variety of customers (1) within the


research, education, and professional arenas. Providing each client with a variety of products and


services (2) to researchers providing an online library of resources, the educational arena


providing textbooks and other publications and interactive products, as well as, professional


development solutions that can be customized to each individual business. Wiley & Sons Inc. is


a global organization with locations in North America, South America, Asia, Australia, Europe,


and the Middle East. (3). Our organization is a leader innovative and technological (4) services


providing all of our services digitally and with technology components. Our organization has


grown tremendously (5) since 1807 and continues to seek new territories of growth in new global


communities. Our organization has a corporate and social responsibility to adhering to and


upholding to ethical and legal standards and protocol with a focus on quality, commitment and


enhancement to our clients (6). (7) What distinguishes Wiley apart from other organizations is


our dedication and commitment to our clients to provide quality and a variety of products and


services with customizable additions.


(8) Wiley is dedicated to contribute to the communities in which we live and serve. ?Wiley


support of non-profit cultural, educational, health, environmental, social service, and publishingindustry related organizations with Corporate Contributions. We support organizations that have


meaning for our colleagues, providing direct grants to organizations and institutions as well as


matching colleagues? monetary donations and volunteer service with cash. We encourage and JOHN WILEY & SONS CASE STUDY 4 support our colleagues? voluntarism. We give back to the professional and scholarly communities


we serve through our corporate contributions, prizes, scholarships, and participation in industry


initiatives.? The Wiley Foundation was also established to recognize excellence in scientific


achievement and discovery. (9) Wiley & Sons, Inc. is a premier employer who treats employee


with respect and dignity. With a premium health care policy, attractive 401K plan, insurance


options (short term/long term disability), life insurance, accidental death, dependent, and travel


insurance with employer paid and supplemental options in place. Paid time off, flex-time, tuition


reimbursement, adoption assistance, career development and child care and elderly care


assistance is why Wiley & Sons, Inc. is a premier employer of choice. John Wiley and Sons? Ratio Analysis


Profit Margin. This ratio indicates what percentage of sales are left after a company pays all its


expenses. John Wiley and Sons profit margin decreased by 1.27% from 2015 to 2016. This is an


indication that its operating costs are a little higher than previous years. This may be due to


material costs, taxes, or a numerous other operating costs. 2016 is the first time in the last four


years that John Wiley & Sons profit margin has decreased. This could be an anomaly but the


company should take a closer look at it operating costs to ensure that they are under control. JOHN WILEY & SONS CASE STUDY 5 Return on Assets. By having a return on assets ratio of 4.92, it shows how efficient John Wiley


and Sons are efficient at managing its assets to produce profits. A positive return on assets


means a company is making profits from its assets. The 2016 financial report for the company


shows that it is not as efficient as it was in past years in using assets to make a profit. However,


the ratio is still positive so the company is still in a good financial state.


Return on Equity. This ratio measures the profitability of the stockholders? investment. It


indicates a company is proficient and is able to create income on investments. While 13.94% is


not bad, it is the first time in four years that it has decreased. Investors typically look for


companies with growing returns on equity because it shows a company?s profit making ability.


Shareholders should be a little concerned because there has been a 10% drop in return of equity


from 2008 of 24.21% to 2016 of 13.94%.


Receivables Turnover. For 2016, John Wiley and Sons is doing a good job in the average time


its take to collect on its accounts receivables. At 10.97, it shows that the company have a decent


amount of cash flow coming in because it is collecting their receivables about every 5 weeks.


This allows for them to be able to pay off current liabilities and expenses. Also it provides John


Wiley and Sons the opportunity to invest because of the steady stream of cash flow.


Average Collection Period. Currently it is taking John Wiley and Sons 33.27 days to collect its


accounts receivables. This is important to any company because this is how long it takes them to


get cash. The company is able to pay its debts on time and frequently because this ratio


illustrates that a steady stream of cash flow is coming into the company.


Inventory Turnover. John Wiley and Sons inventory ratio is 7.67, which means that the


company is selling and replacing its inventory every 48 days. A company wants a high inventory


turnover because it means that whatever they are producing or selling, customers are buying it JOHN WILEY & SONS CASE STUDY 6 frequently. Because of this John Wiley and Sons is in a good financial position for its investors


and potential investors.


Fixed Asset Turnover. This ratio measures how well a company is in generating sales from its


investments, such as a building, plant, and equipment. Since John Wiley and Sons fixed asset


turnover ratio is higher than its competitors, is in a better financial position than them. This


illustrates that the company is operating at capacity, where sales and fixed asset are in balance.


Total Asset Turnover. John Wiley and Sons is not using its assets to generate revenue or


promote sales. This has resulted in a 0.58 ratio. The low number illustrates that the company?s


managers are not efficiently using the company?s assets to generate income. A good indicator for


this low ratio is the decline in revenues. With less revenues coming in 2016, John Wiley and


Sons were unable to efficiently use the assets they have.


Current Ratio. This ration measures a company?s ability to pay its short and long-term


obligations. It involves the company?s current assets and current liabilities. Analysts suggests


that a ratio of under 1 indicates a company?s current liabilities are greater than its assets. It


means that a company would be unable to pay off its liabilities if they came due at the current


time. John Wiley and Sons has a current ratio of 0.86. Since John Wiley and Sons is a


publishing company, it will have a reasonable amount of short-term debt that will be


compensated when the finished products are completed. Since 2014 the company has averaged a


0.95 current ratio, which means that John Wiley and Sons are in a good financial position to pay


its debts.


Quick Ratio. This ratio illustrates a company?s ability to satisfy its short-term liabilities with its


liquid assets. The higher the quick ratio, the better the company?s liquidity position. John Wiley JOHN WILEY & SONS CASE STUDY 7 and Sons quick ratio is 0.68. This may be a little concerning but giving that the company publish


books, journals, and other works, it is not alarming to find its ratio as being this low.


Debt to Total Asset. With a debt to equity ratio of 0.58, John Wiley and Sons is in a solid


financial position. Debt to equity ratio measures the capital structure of a business or in other


words it is a way to examine how a company uses funding resources to pay for its operations.


Most financial experts view a 0.03 or lower debt to equity ratio as a healthy financial state for


businesses. Appendix K shows that John Wiley and Sons has decreased their debt to equity ratio


by 0.09 over the last three years. The company has less debt which translates to it being less of a


financial risk.


Time Interest Earned. This ratio shows a company ability to cover future interest expenses


with its income. Shareholders or inventors like a high number in this ratio because it lets them


know that the company will be able to pay any interest that is due. Because of this reason, John


Wiley and Sons is in great financial shape for this ratio. They are able to pay its interest 10 times




Fixed Charge Coverage Ratio. John Wiley and Sons are in a good financial position when it


comes to fixed charge coverage ratio. This ratio shows the number of times a company can


cover its fixed charges for a year. A high number such as a 10 means to investors or shareholders


that future investments or loans are less risky.


Rate Earned on Stockholder?s Equity. This ratio illustrates a company?s ability to generate a


return or profit on the shareholder?s equity. John Wiley and Sons has been able to provide its


shareholders a decent rate of return in the last few years. This is a result of the company being


able to generate profits which allows them to give something back to its shareholders. JOHN WILEY & SONS CASE STUDY 8 Alternative strategies


There are many alternative strategies that John Wiley and Sons can choose to continue to


be a leader in the publishing industry. An alternative strategy that the company should consider


is expansion. A company that chooses this strategy is looking to broadening the scope of its


business operations to reach new customers or to offer current customers more options to its


products or services. The authors Bang & Joshi (2012) stated ?Extension of a market by


reaching out to new market segments leads to an increase in primary demand. When market


penetration is sought by converting non-customers into customers, it leads to an increase in the


primary demand? (p. 86). Normally, a company that has brand recognition and is a leader in its


industry would choose this strategy.


Expansion brings many benefits to a company. One important benefit of business


expansion is the ability to enter into a market and attract new customers. Expansion also


enhances a company ability to retain current customers. Customers wants and desire are


changing, when a company can foresee these changes, customers won?t have a desire to change


companies. Expansion also brings about economies of scale. A company can achieve lower cost


per unit and spread out administrative cost. JOHN WILEY & SONS CASE STUDY 9 When a company expands, it must be aware of some possible disadvantages. One


disadvantage is capital requirements. Expansion requires a company to invest money and


resources in a new capability which will take away capital from other business operations.


Another disadvantage of this strategy is being spread too thin in not only resources but expertise.


By entering a new market, the company now must have highly trained people in that market. If


there?s only a few experts to manage the new market products or services, expansion could not


be successful.


Another strategy that John Wiley and Sons could use is cost leadership. This is when a


company is the cheapest or provide the best value to customers in the industry. This can be


accomplished through economies of scale, using cheaper materials, or becoming more efficient.


The authors Ferfeli, Vaxevanou, & Damianos (2009) stated ?In order to gain the advantage, the


enterprise tries to achieve reduction of each and every cost that influences its operation? (p. 905).


This type of strategy has many advantages. The first advantage that comes to mind is that


customers like low-priced quality products or services, so more customers will be attract the


company that uses this approach. John Wiley and Sons could take advantage of it strong


footprint in the academic environment and use cost leadership to create a competitive advantage.


Another benefit of using this strategy is increased process or product efficiencies. How the


company get its products to its customer may be improved. This strategy will allow the company


to look at it its processes and find out ways to make it better.


Similarly, this approach has a few disadvantages. One of the biggest disadvantages is


that competitor can copy the strategy and match the low prices. Therefore, there is no


competitive advantages. The publishing industry has very little proprietary equipment or


knowledge, so once John Wiley and Sons have an efficient way of doing business it can be easily


copied. Additionally, by focusing on low prices a company can lose its focus on other things that


made it successful such as quality products and customer service. The reason why the company JOHN WILEY & SONS CASE STUDY 10 has lasted this long is because of its quality of products. The company could be tempted to cut


corners to reduce cost. The poor quality could turn customer off and find value from another


publishing company.


Recommended Strategy


John Wiley and Sons has been around for over two hundred years, so it will want to be


around for many more. Because of this, expansion would be the best strategy for continued


success. While the company is in several countries now, getting into more countries would


expand their customer base. John Wiley and Sons is known for educational documents,


expanding to more countries would increase revenues because those countries would trust the


company?s products and services. Expansion does come with costs, but with the experience with


expansion in Brazil and Dubai the company can capitalize on lessons learned to keep costs down.


Additionally, the company should offer a pay per article or book option for customers.


Some customers may not want monthly or annual subscription fees because they don?t use the


products often. By offering a pay as you view options, customers will only pay for the times that


they want to read something. While there will be some operational adjustments, it should be


minimal additional costs to have a pay per view options for customers. This option will create


value for customers. If they require consist access to John Wiley and Sons material, the


subscription will be the best option. However, if customers only require occasionally access to


the company?s material the pay per view of the material can also create value. This captures


more of the market, which will help John Wiley and Sons continue to be a leader in its industry. JOHN WILEY & SONS CASE STUDY 11 References


Bang, V. V., & Joshi, S. L. (2012). Market expansion strategy ? reasons for and against: what do


manager in India think? Journal of Strategic Marketing, 20(2). Retrieved from http://ezprox




Ferfeli, M. V., Vaxevanou, A. Z., & Damianos, S. P. (2009). Evaluation of Cost Leadership


Strategy in Shipping Enterprises with Simulation Model. AIP Conference Proceedings,


1148(1), 905-908. Retrieved from JOHN WILEY & SONS CASE STUDY 12 Appendix A JOHN WILEY & SONS CASE STUDY 13 Appendix H


John Wiley & Sons? Income Statements 2014 - 2016 Consolidated Statements of


Income - USD ($) shares in




Costs and Expenses


Cost of sales


Operating and administrative




Restructuring charges


Impairment charges


Amortization of intangibles


Total Costs and Expenses


Operating Income


Interest expense


Foreign exchange transaction


gains (losses)


Interest income and other


Income Before Taxes


Provision for Income Taxes


Net Income


Earnings Per Share


Diluted (in dollars per share)


Basic (in dollars per share)


Average Shares


Diluted (in shares)


Basic (in shares)


Class A [Member]


Cash Dividends Per Share


Common stock (in dollars per




Class B [Member]


Cash Dividends Per Share


Common stock (in dollars per


share) 12 Months Ended




April 30,








$ 1,727,037


$ (95,403) April 30,


2015 April 30,


2014 465,917


994,632 (33,766)


(10,368) 499,683


1,005,000 $ 47,245






35,544 28,611












473 (193)












(1,269) 28,804












1,742 (13,918)












1,750 42,722












(8) 2,914






$ 145,782 (143)






$(31,086) 3,057






$ 176,868 272






16,358 2,785






$ 160,510 $ 2.48


$ 2.51 $ (0.49)


$ (0.50) $ 2.97


$ 3.01 0


0 $ 2.70


$ 2.73 58,734


57,998 (860)


(735) 59,594


58,733 80


98 59,514


58,635 $ 1.20 $ 0.04 $ 1.16 $ 0.16 $ 1.00 $ 1.20 $ 0.04 $ 1.16 $ 0.16 $ 1.00 Appendix I


John Wiley & Sons? Cash Flow Statements 2014 - 2016 $ 1,822,440 Change


from 2014 $ 1,775,195




969,456 JOHN WILEY & SONS CASE STUDY Consolidated Statements of


Cash Flows - USD ($) $ in Thousands


Operating Activities


Net Income


Adjustments to reconcile net income to


net cash provided by operating activities


Amortization of intangibles


Amortization of composition costs


Depreciation of technology, property and




Restructuring and impairment charges


Deferred tax benefits on U.K. rate changes


Share-based compensation


(Excess) shortfalls in tax benefits from


share-based compensation


Employee retirement plan expense


Royalty advances


Earned royalty advances


Other non-cash credits, net


Income tax deposits


Changes in Operating Assets and


Liabilities Source (Use), excluding




Accounts receivable




Accounts and royalties payable


Deferred revenue


Income taxes payable


Restructuring payments


Other accrued liabilities


Employee retirement plan contributions




Cash Provided by Operating Activities


Investing Activities


Composition spending


Additions to technology, property and




Acquisitions, net of cash acquired


Proceeds from sale of consumer publishing




Cash Used for Investing Activities


Financing Activities


Repayment of long-term debt 14 12 Months Ended




April 30,






2015 April 30,


2015 Change


from 2014 April 30,


2014 $ 145,782 $ (31,086) $ 176,868 $ 16,358 $ 160,510 49,764




66,427 (1,450)




4,355 51,214




62,072 6,535




3,751 44,679




58,321 28,611






(1,027) (193)






2,164 28,804






(3,191) (18,704)






(4,657) 47,508






1,466 14,323








(1,151) (8,276)








4,129 22,599








(5,280) (7,855)








6,688 30,454








(11,968) (14,456)


















349,957 (18,944)


















(5,165) 4,488


















355,122 (14,070)


















6,898 18,558


















348,224 (37,272)


(93,705) 2,149


(24,584) (39,421)


(69,121) 1,147


(11,557) (40,568)


(57,564) (20,418)


0 151,811


(1,100) (172,229)


1,100 (117,714)


(2,200) (54,515)


3,300 (151,395) 128,276 (279,671) (130,324) (149,347) (460,085) 251,569 (711,654) (53,430) (658,224) JOHN WILEY & SONS CASE STUDY


Repayment of short-term debt


Borrowings of long-term debt


Borrowing of short-term debt


Purchase of treasury stock


Change in book overdrafts


Cash dividends


Debt financing costs


Net (payments)/proceeds from exercise of


stock options and other


Excess (shortfalls) in tax benefits from


share-based compensation


Cash Used for Financing Activities


Effects of Exchange Rate Changes on Cash


Cash and Cash Equivalents


(Decrease) Increase for year


Balance at beginning of year


Balance at end of year


Cash Paid During the Year for




Income taxes, net 15 (150,000)














(95) (150,000)














(25,421) 0














25,326 0














(30,206) 0














55,532 1,027 (2,164) 3,191 4,657 (1,466) (285,663)


(6,534) (224,705)


36,895 (60,958)


(43,429) (7,424)


(50,323) (53,534)


6,894 (93,635)




363,806 (64,699)




(93,635) (28,936)




457,441 (181,173)




(28,936) 152,237




486,377 15,050


$ 38,579 175


$ (7,067) 14,875


$ 45,646 2,364


$ (18,169) 12,511


$ 63,815 JOHN WILEY & SONS CASE STUDY 16 Appendix J


John Wiley & Sons? Balance Sheets 2014 - 2016 Consolidated Statements of Financial


Position ? USD ($) $ in Thousands


Current Assets


Cash and cash equivalents


Accounts receivable




Prepaid and other


Total Current Assets


Product Development Assets


Technology, Property & Equipment


Intangible Assets




Income Tax Deposits


Other Assets


Total Assets


Current Liabilities


Short-term debt


Accounts and royalties payable


Deferred revenue


Accrued employment costs


Accrued income taxes


Accrued pension liability


Other accrued liabilities


Total Current Liabilities


Long-Term Debt


Accrued Pension Liability


Deferred Income Tax Liabilities


Other Long-Term Liabilities


Shareholders' Equity


Preferred Stock, $1 par value: Authorized


- 2 million, Issued - zero


Additional paid-in-capital


Retained earnings


Accumulated other comprehensive




Foreign currency translation adjustment


Unamortized retirement costs, net of tax


Unrealized loss on interest rate swap, net


of tax April 30,


2016 Change from


2015 April 30,


2015 Change


from 2014 April 30,


2014 $ 363,806






















2,921,096 $ (93,635)






















(83,147) $ 457,441






















3,004,243 $ (28,936)






















(73,122) $ 486,377






















3,077,365 0






















83,138 (100,000)






















(3,618) 100,000






















86,756 100,000






















8,442 0
















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