Showing 1324–1332 of 1959 results

  • Fi515 Week 1 Assignment

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    Question (2-6)
    In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends was paid to shareholders during the year?

    Question (2-7)
    The Talley Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest charges of $50,000, (2) dividends received of $15,000, (3) dividends paid of $25,000, and (4) income taxes.

    1. a) What are the firm’s income tax liability and its after-tax income?
    2. b) What are the company’s marginal and average tax rates on taxable income?

    Question (2-9)

    The Shrieves Corporation has $10,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 7.5%, state of Florida muni bonds, which yield 5% (but are not taxable), and AT&T preferred stock, with a dividend yield of 6%. Shrieves’ corporate tax rate is 35%, and 70% of the dividends received are tax exempt. Find the after-tax rates returns on all three securities

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  • Fi515 Week 5 Assignment

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    Fi515 Week 5 Assignment

    (11-7) New-Project Analysis
    You have been asked by the president of your company to evaluate the proposed acquisition of a new spectrometer for the firm’s R&D department. The equipment’s basic price is $70,000, and it would cost another $15,000 to modify it for special use by your firm. The spectrometer, which falls into the MACRS 3-year class, would be sold after 3 years for $30,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000. The spectrometer would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm’s marginal federal-plus-state tax rate is 40%.

    1. What is the net cost of the spectrometer? (That is, what is the Year-0 net cash flow?)
    2. What are the net operating cash flows in Years 1, 2, and 3?
    3. What is the additional (non-operating) cash flow in Year 3?
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  • Fi515 Week 7 Assignment

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    16-1 Cash Management
    Williams & Sons last year reported sales of $10 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm’s inventory level and increase the firm’s inventory turnover ratio to 5 while maintaining the same level of sales, how much cash will be freed up?

    16-2 Receivables Investment
    Medwig Corporation has a DSO of 17 days. The company averages $3,500 in credit sales each day. What is the company’s average account receivable? AR= Credit sales per day x length of collection period

    16-3 Cost of Trade Credit
    What is the nominal and effective cost of trade credit under the credit terms of 3/15, net 30?

    16-4 Cost of Trade Credit
    A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer’s effective cost of trade credit?

    16-5 Accounts Payable
    A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40. APP always takes the discount but takes the full 15 days to pay its bills. What is the average accounts payable for APP?

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  • FI515 Homework 4

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    (12–1) AFN Equation
    Baxter Video Products’s sales are expected to increase by 20% from $5 million in 2010 to $6 million in 2011. Its assets totaled $3 million at the end of 2010. Baxter is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2010, current liabilities were $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accruals. The after tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Baxter’s additional funds needed for the coming year.

    (13-2) Value of Operations of Constant Growth Firm
    EMC Corporation has never paid a dividend. Its current free cash flow of $400,000 is expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC = 12%. Calculate EMC’s value of operations

    (13-4) EROIC and MVA of Constant Growth Firm
    A company has capital of $200 million. It has an EROIC of 9%, forecasted constant growth of 5%, and a WACC of 10%. What is its value of operations? What is its intrinsic MVA? (Hint: Use Equation 13-5.)

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  • FI515 Homework#1

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    Problems pg 79: 2-6
    In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends was paid to shareholders during the year?

    2-7
    The Talley Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest charges of $50,000, (2) dividends received of $15,000, (3) dividends paid of $25,000, and (4) income taxes. What are the firm’s in- come tax liability and its after-tax income? What are the company’s marginal and average tax rates on taxable income?

    2-9
    The Shrieves Corporation has $10,000 that it plans to invest in marketable secu- rities. It is choosing among AT&T bonds, which yield 7.5%, state of Florida muni bonds, which yield 5% (but are not taxable), and AT&T preferred stock, with a dividend yield of 6%. Shrieves’s corporate tax rate is 35%, and 70% of the dividends received are tax exempt. Find the after-tax rates of return on all three securities.

    Mini Case pg 45
    Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle DellaTorre, a professional tennis player who has just come to the United States from Chile. DellaTorre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer. DellaTorre is very bright, and she would like to understand in general terms what will happen to her money. Your boss has developed the following set of questions you must answer to ex- plain the U.S. financial system to DellaTorre.

    A. Why is corporate finance important to all managers?

    B. Describe the organizational forms a company might ha ve as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form
    C. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
    D. What should be the primary objective of managers?
    1 Do firms have any responsibilities to society at large?
    2 Is stock price maximization good or bad for society?
    3 Should firms behave ethically?
    E. What three aspects of cash flows affect the value of any investment?
    F. What are free cash flows?
    G. What is the weighted average cost of capital?
    H. How do free cash flows and the weighted average cost of capital interact to determine a firm’s value?
    I. Who are the providers (savers) and users (borrowers) of capital? How is capital transferred between savers and borrowers?
    J. What do we call the price that a borrower must pay for debt capital? What is the price of equity capital? What are the four most fundamental factors that affect the cost of money, or the general level of interest rates, in the economy?
    K. What are some economic conditions (including international aspects) that affect the cost of money?
    L. What are financial securities? Describe some financial instruments.
    M. List some financial institutions
    N. What are some different types of markets?
    O. How are secondary markets organized?
    1 List some physical location markets and some computer/telephone networks
    2 Explain the differences between open outcry auctions, dealer markets, and electronic communications networks (ECNs).
    P. Briefly explain mortgage securitization and how it contributed to the global economic crisis.
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  • Fi515 Week 3 Assignment

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    Fi515 Week 3 Assignment

    Problems (pp. 210-211)
    5-1 Bond Valuation with Annual Payments
    Jackson Corporation’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?

    5-2 YTM for Annual Payments
    Wilson Wonders’s bonds have 12 years remaining to maturity. Interest is paid annu- ally, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity?

    5-6 Maturity Risk Premium
    The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.3%. What is the maturity risk premium for the 2-year security?

    5-7 Bond Valuation with Semi-Annual Payments
    Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?

    5-13 Yield to Maturity and Current Yield
    You just purchased a bond that matures in 5 years. The bond has a face value of $1,000 and has an 8% annual coupon. The bond has a current yield of 8.21%. What is the bond’s yield to maturity?

    Questions (p. 257)
    6-6 Beta and expected return
    If a company’s beta were to double, would its expected return double?

    Problems (pp. 258-259)
    6-1 Portfolio Beta
    An individual has $35,000 invested in a stock with a beta of 0.8 and another $40,000 invested in a stock with a beta of 1.4. If these are the only two investments in her portfolio, what is her portfolio’s beta?

    6-2 Required Rate of Return Stock
    Assume that the risk-free rate is 6% and that the expected return on the market is 13%. What is the required rate of return on a stock that has a beta of 0.7?

    6-7 Required Rate of Return
    Suppose rRF = 9%, rM = 14%, and bi = 1.3.
    a. What is ri, the required rate of return on Stock i?
    b. Now suppose rRF (1) increases to 10% or (2) decreases to 8%. The slope of the
    SML remains constant. How would this affect rM and ri?
    c. Now assume rRF remains at 9% but rM (1) increases to 16% or (2) falls to 13%.
    The slope of the SML does not remain constant. How would these changes affect ri?

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  • ACCT3708 Week 3

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    Q1. What is the link between audit risk and engagement risk? How does the audit risk model allow the auditor to deal with these risks in the most cost effective manner?

    Q2. Discuss the procedures that should be followed and the matters that should be considered when accepting a new audit engagement

    Q3. What would you include in an engagement letter?

    Q4. What is the key account and key audit assertion that is affected by each of the following accounting issues:

    • excessive bad debts
    • inventory purchased in foreign currencies,
    • unusual lengthening of the useful lives of assets,
    • capitalisation of research and development expenditure on failed projects
    • complex payroll calculations,
    • customers cancelling sales orders,
    • prepayment of insurance premiums,
    • changes in the fair value of shares held for investment purposes,

    Q5. During the course of an audit engagement, an independent must address the concept of materiality. This concept is inherent in the work of the independent auditor and is important for planning, evidence gathering, error evaluation and the audit opinion-forming process.

    1. Briefly describe what is meant by the independent auditor’s concept of materiality
    2. Outline the relevance of materiality during each of the following stages of the audit process:
    3. a. Planning
    4. Evaluation of the results of audit testing c. Forming and audit opinion
    5. Discuss the process of setting the planning materiality for an audit
    6. Explain the concept of performance materiality

    Q6. XYZ Ltd is a publicly listed company which has suffered from major sales declines, due to increased foreign completion, and has made a succession of losses over the past three years. During the year, its CEO resigned and was replaced by Chief Operating Officer (COO). The trial balance reveals that sales were $10,000,000 and the company made a loss of $500,000. At what level would you set planning materiality? Justify your answer.

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  • Accounting Cycle Paper

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    Accounting Cycle Paper  ACC 421 Week 1

    Prepare a 2 page paper explaining the overall accounting cycle at your organization. If you are not working, you may choose to describe the accounting cycles in general, but must cite your sources in APA format.

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  • ACC/421 Week 3 Textbook Solutions

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    Problem P4-4

    The following account balances were included in the trial balance of Twain Corporation at June 30, 2012.

    Sales $1,578,500 Depreciation of office furniture and $7,250
    Sales discounts 31,150       equipment
    Cost of goods sold 896,770 Real estate and other local taxes 7,320
    Sales salaries 56,260 Bad debt expense�selling 4,850
    Sales commissions 97,600 Building expense�prorated to 9,130
    Travel expense�salespersons 28,930       administration
    Freight-out 21,400 Miscellaneous office expenses 6,000
    Entertainment expense 14,820 Sales returns 62,300
    Telephone and Internet expense�sales 9,030 Dividends received 38,000
    Depreciation of sales equipment 4,980 Bond interest expense 18,000
    Building expense�prorated to sales 6,200 Income taxes 102,000
    Miscellaneous selling expenses 4,715 Depreciation understatement due to 17,700
    Office supplies used 3,450       error�2009 (net of tax)
    Telephone and Internet expense� 2,820 Dividends declared on preferred stock 9,000
          administration Dividends declared on common stock 37,000

    The Retained Earnings account had a balance of $337,000 at July 1, 2011. There are 80,000 shares of common stock outstanding.
    Using the multiple-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2012.

    Problem P18-2

    Shanahan Construction Company has entered into a contract beginning January 1, 2014, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.

    2014                 2015                 2016

    Costs to date                                                     $270,000           $450,000           $610,000

    Estimated costs to complete                               330,000           150,000               -0- Progress billings to date                                     270,000           550,000           900,000

    Cash collected to date                                         240,000           500,000             900,000

    Instructions

    (a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.

    (b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.

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