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Digby’s Competitive Intelligence

Digby’s balance sheet has $94,680,000 in equity. If next year, assets decrease by $4,000,000 and liabilities increase by $2,000,000, what will be Digby’s book value?
Select: 1
$92,679,000 $96,680,000 $38,651,000 $88,679,000
Which company has the least efficient SG&A/Sales ratio?
Select: 1
Chester Baldwin Andrews Digby
Your Competitive Intelligence team reports that a wave of product liability lawsuits is likely to cause Digby to pull the product Drum entirely off the market this year. Assume Digby scraps all capacity and inventory this round, completely writing off those assets and escrowing the proceeds to a settlement fund, and assume these lawsuits will have no effect on any other products of Digby or other companies. Without Digby’s product Drum how much can the industry currently produce in the Core segment? Consider only products primarily in the Core segment last year. Ignore current inventories. Figures in thousands (000).
Select: 1
7,278 3,886 8,528 8,256 9,506 9,236 4,618
In the month of March the Digby Corporation received and delivered orders of 178,000 units at a price of $15.00 for revenue of $2.670mil for their product Dim. Digby uses the accrual method of accounting and offers 30 day credit terms. By the end of May Digby had collected payments of $2.670mil for the March deliveries. How much of the collected $2.670mil should Digby show on the March 31st income statement and how much on the May 31st income statement?
Select: 1
$0 in March;$2.670mil in May $0.881mil in March;
$1.789mil in May $1.335mil in March;
$1.335mil in May $2.670mil in March;
$0 in May
Chester Corp. is downsizing the size of their workforce by 10% (to the nearest person) next year from various strategic initiatives.   How much will the company pay in separation costs if each worker receives $5,000 when separated?
Select: 1
$122,000 $1,094,000 $305,000 $2,735,000
Assume Andrews is paying a dividend of $1.50 (per share). If this dividend stayed the same, but the stock price rose by 10% what would be the dividend yield?
Select: 1
109.09% 177.27% .73% 136.36%
Last year Ark charged $3,040,000 Depreciation on the Income Statement of Andrews. If Ark sold a fully depreciated piece of equipment at a loss, the effect on Andrews’s financial statements would be (all other items remaining equal):
Select: 1
Increase Net Cash from operations Decrease Net Cash from operations on the Cash Flow Statement Just impact the Balance Sheet No impact on Net Cash from operations
Assume Baldwin is producing 1,568 units of Bolt next year. What would Bolt’s plant utilization be?
Select: 1
96.90% 93.10% 95.00% 96.02%

example of frauds

Complete the following homework scenarios:

A local bank reported that it lost $150,000 as the result of an employee fraud. Edward Jasso is not clear on what is meant by an “employee fraud.” Explain the meaning of fraud to Edward and give an example of frauds that might occur at a bank.

_________________________________________________________________________________

  • Bob and Lisa are both married, working adults. They both plan for retirement and consider the $2,000 annual contribution a must.

    First,  consider Lisa’s savings. She began working at age 20 and began making  an annual contribution of $2,000 at the first of the year beginning with  her first year. She makes 13 contributions. She worked until she was 32  and then left full time work to have children and be a stay at home  mom. She left her IRA invested and plans to begin drawing from her IRA  when she is 65.

    Bob started his IRA at age 32. The first 12 years  of his working career, he used his discretionary income to buy a home,  upgrade the family cars, take vacations, and pursue his golfing hobby.  At age 32, he made his first $2,000 contribution to an IRA, and  contributed $2,000 every year up until age 65, a total of 33 years /  contributions. He plans to retire at age 65 and make withdrawals from  his IRA.

    Both IRA accounts grow at a 7% annual rate. Do not consider any tax effect.   
  • Write a two to three (2-3) paragraph summary in which you:
     
    • Create a chart summarizing the details of the investment for both Bob and Lisa.     
    • Explain the results in terms of time value of money.
      ____________________________________________________________________
      Dear FIN 100,
      The second homework assignment for week-6 deals with a series of time-value-of-money problems. 

       For the Lisa scenario there are actual two TVM problems.  The first  section addresses the FVAD.  Not that the present value is zero, and the  payment is made at the beginning of the year.   You will then have to  invest the FVAD amount as a PV for the second scenario.  You should  determine the FV amount at her retirement age of 65 years old.
      For the Bob scenario, you are also find the FVAD.  Bob is making 33 contributions at the beginning of the year.  
      Remember  to provide your work in Excel and provide a chart or some summation of  your calculations and time-lines for each person.  Please summarize your  results for both of their retirement accounts.
      You may want to review the TVM links provided on the announcement page. 
      You  may also want to review the following links regarding the IRA accounts,  both traditional and Roth IRAs, for your own general knowledge.

      https://www.irs.gov/Retirement-Plans/Traditional-IRAs
      https://www.irs.gov/Retirement-Plans/Roth-IRAs
      https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits

Kenneth Day Manufacturing

A production process at Kenneth Day Manufacturing is shown in Figure S7.9. The drilling operation occurs separately from, and simultaneously with, the sawing and sanding operations. Sawing Sanding Assembly 6 units/hr 6 units/hr 0.7 units/hr Drilling 2.4 units/hr Welding Assembly 2 units/hr 0.7 units/hr Assembly 0.7 units/hr A product needs to go through only one of the three assembly operations (the operations are in parallel).

question 2

In Cambodia, six laborers, each making the equivalent of $3 per day, can produce 40 units per day. In China, ten laborers, each making the equivalent of $2 per day, can produce 45 units. In Billings, Montana, two laborers, each making $60 per day, can make 100 units. Based on labor costs only, which location would be most economical to produce the item?

The Hasting Company FIFO method

FINANCE –EXAM 3

1.    The Hasting Company began operations on January 1, 2003 and uses the FIFO method in costing its raw material inventory. An analyst is wondering what net income would have been if the company had consistently followed LIFO (instead of FIFO) from the beginning, 1/1/2003. He has the following information available to him:

What would net income have been in 2004 if Hastings had used LIFO since 1/1/2003?

[removed]$ 110,000

[removed]$ 150,000

[removed]$ 170,000

[removed]$ 230,000

2.    A customer is currently suing a company. A reasonable estimate can be made of the costs that would result from a ruling unfavorable to the company, and the amount involved is material. The company’s managers, lawyers, and auditors agree that there is only a remote likelihood of an unfavorable ruling. This contingency:

[removed]Should be disclosed in a footnote.

[removed]Should be disclosed as a parenthetical comment in the balance sheet.

[removed]Need not to be disclosed.

[removed]Should be disclosed by an appropriation of retained earnings.

3.    The ABC Company operates a catering service specializing in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Collections from customers have never been an issue in the past. ABC should recognize revenue from its catering services at the date when a:

[removed]Customer places an order.

[removed]Luncheon is served.

[removed]Billing is mailed.

[removed]Customer’s payment is received.

4.    On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore’s books. Cole should record the patent at:

[removed]$80,000

[removed]$90,000

[removed]$135,000

[removed]$160,000

5.    On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore’s books. Cole should record the patent at:

[removed]$80,000

[removed]$90,000

[removed]$135,000

[removed]$160,000

6.    On January 1, 1997, Phillips, Inc. leased a new machine from U.S. Leasing. The specific information on the lease is as follows:

On January 1, 1997, Phillips, Inc. should record a lease liability of:

[removed]$275,000

[removed]$359,464

[removed]$0

[removed]$250,000

7.    FRC Inc. acquired Marketing Inc on 1/1/2004. Marketing Inc. has 10,000 shares outstanding. Each share in Marketing Inc. was exchanged for half a share in FRC, Inc. Shares of FRC Inc., were trading at $100 per share at the date of the announcement of the transaction. Marketing Inc, had the following assets and liabilities that were assumed by FRC Inc.

The amount of Goodwill recognized by FRC, Inc. on January 1, 2004 is:

[removed]$400,000

[removed]$360,000

[removed]$495,000

[removed]$455,000

8.    ABC expenses stock options as required by GAAP. On January 1,2005, ABC granted 50 key executives 100 options each. Each option entitled the option holder to purchase 1 share of ABC common stock at $60 per share. The options will vest on January 1st 2008.

On the grant date, January 1st, 2005, the stock was quoted on the stock exchange at $63 per share. The fair value of the options on the grant date was estimated at $15 per option. The amounts of compensation expense ABC should recognize with respect to the options during 2005, 2006, and 2007 are:

[removed]1.

[removed]2.

[removed]3.

[removed]4.

9.    Which of the following situations will not cause a deferred income tax amount to be recorded?

[removed]An expense that is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.

[removed]Interest income from municipal bonds that is recognized in 2005 for financial statement purposes but is tax exempt for income tax purposes.

[removed]A revenue is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes.

[removed]None of the above situations would cause a deferred income tax amount.

10.  In periods with rising prices and increasing quantities of inventories, which of the following relationships among inventory valuation methods is generally correct:

[removed]FIFO has a higher inventory balance and a lower net income than LIFO.

[removed]FIFO has a higher inventory balance and a higher net income than LIFO.

[removed]LIFO has a higher inventory balance and a higher net income than FIFO.

[removed]LIFO has a higher inventory balance and a lower net income than FIFO.

11.  Denny Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenues. This account had a balance of $900,000 at December 31, 2001 before year-end adjustment. Service contracts still outstanding at December 31, 2001 expire as follows:

What amount should be reported as Unearned Service Revenues in Denny’s December 31, 2001 balance sheet?

[removed]$900,000

[removed]$600,000

[removed]$1,500,000

[removed]$300,000

12.  ABC signed a 5-year operating lease agreement whereby WXY Rentals will provide a truck which cost WXY $20,000. The lease payments are $2,500, payable at the end of each year. The truck will revert to WXY at the end of five years. The truck has a 10-year useful life. At the inception of the lease, ABC should:

[removed]make no journal entry

[removed]record rental expense of $2,500 for the first year’s rental

[removed]record the lease asset and a corresponding liability, at its current market value

[removed]record the lease asset and a corresponding liability, at the present value of the five equal annual lease payments.

13.  Merry Co. purchased a machine costing $125,000 for its manufacturing operations and paid shipping costs of $20,000. Merry spent an additional $10,000 testing and preparing the machine for use. What amount should Merry record as the cost of the machine?

[removed]$155,000

[removed]$145,000

[removed]$135,000

[removed]$125,000

14.  Ignoring any related tax implications, what is the effect on a company’s balance sheet when depreciation expense is recognized?

[removed]This transaction affects only the income statement, so no change on the balance sheet will occur.

[removed]Total assets and total stockholder’s equity will decrease by the same amount.

[removed]There will be no change in the total assets, liabilities and stockholders equity accounts.

[removed]Total liabilities will increase and total stockholder’s equity will decrease by the same amount.

15.  The Hastco Company had the following balances in their stockholders’ equity accounts as of December 31, 2000:

Paid-in Capital: $53,000

Retained Earnings: $31,000

During the year ended December 31, 2000, The Hastco Company generated $36,000 in net income, and declared and paid $16,000 in Dividends. The ending balance in the retained earnings account at December 31, 1999 was:

[removed]$11,000

[removed]$37,000

[removed]$5,000

[removed]$61,000

16.  All of the following would qualify a lease as a capital lease except:

[removed]The lease term is 80% of the asset’s estimated useful life.

[removed]The lease agreement contains a bargain purchase option.

[removed]The present value of the lease payments equals 70% of the fair market value of the leased asset.

[removed]Title to the leased asset transfers to the lessee at the end of the lease term.

17.  Which of the following is/are criteria for recognizing revenue from a sale?

[removed]Title and risks of ownership have been exchanged.

[removed]The company is reasonably assured of collecting the receivable.

[removed]The customer has, in turn, sold the product to its own customer.

[removed]Both title and risks of ownership have been exchanged and the company is reasonably assured of collecting the receivable.

18.  Use the following information to answer the next two questions.

Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.

If Downey uses the straight-line method of depreciation, what is the depreciation expense for 2006 and book value at the end of 2006?

[removed]$7,300 and $58,400

[removed]$6,500 and $60,000

[removed]$6,790 and $62,320

[removed]$6,500 and $66,500

19. Downey Company bought a delivery truck for $62,000 on January 1, 2005. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.

If Downey uses the double declining-balance method, how much is the truck’s depreciation expense for2006?

[removed]$11,680

[removed]$12,144

[removed]$10,400

[removed]$11,760

20.  For accounting purposes, goodwill

[removed]is recorded whenever a company achieves a level of net income that exceeds the industry average.

[removed]is recorded when a company purchases another business.

[removed]is expensed in the period it is recorded because benefits from goodwill are difficult to identify.

[removed]is never recorded

21.  Goodwill should

[removed]be written off as soon as possible against retained earnings.

[removed]absent impairment, not be written off because it has an indefinite life.

[removed]written off as soon as possible as an expense.

[removed]amortized over a maximum of forty years.

22.  Freeman, Inc., reported net income of $40,000 for 2005. However, the company’s income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 2006. Assuming a 30% income tax rate, this situation would cause a 2005 deferred tax amount of

[removed]$3,000 asset.

[removed]$3,000 liability

[removed]$ 900 asset.

[removed]$ 900 liability.

23.  Before closing entries were recorded at the end of the accounting period (December 31, 2005), the following data were taken from the accounts of Buynow Corporation:

The total amount of owners’ equity that should be reported on the balance sheet dated December 31, 2005, after all the closing entries, is

[removed]$ 338,000.

[removed]$128,000.

[removed]$300,000.

[removed]$304,000.

24. The major accounting difference between interest incurred during a period and cash dividends declared during the same period is:

[removed]Interest decreases retained earnings while dividend declared increases retained earnings

[removed]Interest reduces net income while dividends declared do not affect net income

[removed]Interest does not affect net income while dividends reduce net income

[removed]There is no major difference. Both are treated identically for accounting purposes.

25.  In December, a Global Grocer customer pays in time and receives a 2% discounts for prompt payment. The customer had purchased goods worth $500. Which of the possible answers below correctly states the journal entries to record the payment and the discount taken. Previously, Global Grocer had established an allowance for prompt payment discounts.

[removed]Debit Accounts receivable ($500); Credit Cash ($490); credit allowance for discounts ($10).

[removed]Debit Cash ($500); Credit Accounts receivable ($500).

[removed]Debit Cash ($490); Debit Allowance for sales discounts ($10); Credit Accounts receivable ($500)

[removed]None of the above

26.  Here is International Corp.’s income statement for the month of December.

What is the company’s December EBITDA to total interest coverage ratio?

[removed]6.5x

[removed]18.5x

[removed]14.5x

[removed]20.2x

27.  The following financial ratios are for Average Corp. and Superior Corp., two hardware stores.

Which of the following statements is inconsistent with the above ratios?

[removed]Superior Corp has a higher return on equity primarily because it has a significantly higher net income margin

[removed]Average Corp. on a relative basis uses significantly more debt financing than Superior Corp.

[removed]Average Corp. utilizes its assets more effectively than Superior Corp.

[removed]Superior Corp. generates more income per dollar of sales than Average Corp.

28.On June 30, 2000, Microsoft Corporation was holding $4.8 billion of cash that it had collected from customers in advance for future software licenses and the future delivery of other products and services. In its financial statements, Microsoft classified and recorded this amount as:

[removed]part of revenue on its income statement.

[removed]the asset Accounts Receivable on its balance sheet.

[removed]the liability Unearned Revenue on its balance sheet.

[removed]an expense on its income statement.

29.  Which statement is false?

[removed]An unrealized gain or loss on hold-to-maturity marketable securities is recognized in income.

[removed]An unrealized gain or loss on trading securities is recognized in income.

[removed]An unrealized gain or loss on a company’s common stock held by the owners’ of the company is not recognized by the company.

[removed]An unrealized gain or loss on available-for-sale marketable securities is not recognized in income.

30.  International, Inc. established an allowance for bad debts at the end of October. In November, International wrote off a $500 account receivable because payment was considered to be remote. What would be the effect of the $500 account receivable write-off on International’s November financial statements?

[removed]Assets would decrease, liabilities would remain constant and retained earning would decrease.

[removed]Assets would remain constant; liabilities would increase and retained earnings would decrease.

[removed]No change would be made in total assets, liabilities or shareholder’s equity.

[removed]Assets would decrease, liabilities would decrease and retained earnings would remain constant.

Calculating Payback

Page 305

Question 1. Calculating Payback[LO2] What is the payback period for the following set of cash flows?

YearCash Flow
0−$7,600
1 1,900
2 2,900
3 2,300
4 1,700

Question 3. Calculating Payback[LO2] Siva, Inc., imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should it accept either of them?.

YearCash Flow (A)Cash Flow (B)
0−$45,000−$ 55,000
1 16,000 13,000
2 21,000 15,000
3 15,000 24,000
4 9,000 255,000

Question 4.  Calculating Discounted Payback[LO3] An investment project has annual cash inflows of $2,800, $3,700, $5,100, and $4,300, for the next four years, respectively. The discount rate is 14 percent. What is the discounted payback period for these cash flows if the initial cost is $5,200? What if the initial cost is $5,400? What if it is $10,400

Page 306

Question6. Calculating AAR[LO4] You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $15 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,754,000, $1,820,500, $1,716,300, and $1,097,400 over these four years, what is the project’s average accounting return (AAR)?

Question 7.  Calculating IRR[LO5] A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project?

YearCash Flow
0−$26,000
1 11,000
2 14,000
3 10,000

Question 8. Calculating NPV[LO1] For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 percent?

Page 307

Question 15. Calculating Profitability Index[LO7] What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is 15 percent? If it is 22 percent?

YearCash Flow
0−$15,300
1 9,400
2 7,600
3 4,300

Question 16.Problems with Profitability Index[LO1,7] The Sloan Corporation is trying to choose between the following two mutually exclusive design projects:

YearCash Flow (I)Cash Flow (II)
0−$51,000−$14,400
1 24,800 7,800
2 24,800 7,800
3 24,800 7,800

1.  If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept?

2.  If the company applies the NPV decision rule, which project should it take?

3.  Explain why your answers in (a) and (b) are different.

Page 308

Question 17.   Comparing Investment Criteria[LO1,2,3,5,7] Consider the following two mutually exclusive projects:

YearCash Flow (A)Cash Flow (B)
0−$455,000−$65,000
1 58,000 31,000
2 85,000 28,000
3 85,000 25,000
4 572,000 19,000

Whichever project you choose, if any, you require a return of 11 percent on your investment.

1.  If you apply the payback criterion, which investment will you choose? Why?

2.  If you apply the discounted payback criterion, which investment will you choose? Why?

3.  If you apply the NPV criterion, which investment will you choose? Why?

4.  If you apply the IRR criterion, which investment will you choose? Why?

5.  If you apply the profitability index criterion, which investment will you choose? Why?

6.  Based on your answers in (a) through (e), which project will you finally choose? Why?

Question 19. MIRR[LO6] RAK Corp. is evaluating a project with the following cash flows:

Year Cash Flow
0−$41,000
1 15,700
2 19,400
3 24,300
4 18,100
5 −9,400

The company uses an interest rate of 10 percent on all of its projects. Calculate the MIRR of the project using all three methods.

  • Posted: 3 Years Ago

Page 305 Question 1. Calculating Payback[LO2] What Is The Payback Period For The Following Set Of Cash Flows? Year Cash Flow 0 −$7,600 1 1,900 2 2,900 3 2,300 4 1,700 Question 3. Calculating Payback[LO2] Siva, Inc., Imposes A Payback Cutoff Of Three Y

POM Case Study.

  • POM Case Study. Use the questions below to answer for the assignment.  Your paper should be 2-3 pages, double spaced, in APA format.
  1. Is there any difference in potential deception between Coca-Cola’s advertisers and POM Wonderful’s advertising?
  2. Why does the FTC want food and supplement makers’ claims about the health impact of their products to be substantiated with clinical trials?
  3. Do you feel that POM Wonderful—a product with known health attributes—should be subjected to the same scrutiny as drug companies if it wants to make health claims about its product?

What coupon rate should the company set on its new bonds

Say you own an asset that had a total return last year of 15 percent. Assume the inflation rate last year was 2.5 percent.
Required:
What was your real return? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Real return[removed]%   
Bond J has a coupon rate of 4 percent. Bond S has a coupon rate of 14 percent. Both bonds have 10 years to maturity, make semiannual payments, and have a YTM of 8 percent.
Requirement 1:
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).)
 Percentage
change in price
  Bond J[removed]%  
  Bond S[removed]%  
Requirement 2:
If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
 Percentage
change in price
  Bond J[removed]%  
  Bond S[removed]%  
BDJ Co. wants to issue new 25-year bonds for some much-needed expansion projects. The company currently has 7.8 percent coupon bonds on the market that sell for $1,125, make semiannual payments, and mature in 20 years.
Required:
What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Coupon rate[removed]%   
Suppose your company needs to raise $30 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 7.5 percent, and you’re evaluating two issue alternatives: a 7.5 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 35 percent.
Requirement 1:
(a)How many of the coupon bonds would you need to issue to raise the $30 million? (Do not round intermediate calculations. Enter the whole number for your answer, not millions (e.g., 1,234,567).)
  Number of coupon bonds[removed] 
(b)How many of the zeroes would you need to issue? (Do not round intermediate calculations. Enter your answer in dollars, not millions (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)
  Number of zero coupon bonds[removed] 
Requirement 2:
(a)In 20 years, what will your company’s repayment be if you issue the coupon bonds? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)
  Coupon bonds repayment$ [removed] 
(b)What if you issue the zeroes? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to the nearest whole dollar amount (e.g., 32).)
  Zero coupon bonds repayment$ [removed] 
Requirement 3:
Assume that the IRS amortization rules apply for the zero coupon bonds.
  
Calculate the firm’s aftertax cash outflows for the first year under the two different scenarios. (Do not round intermediate calculations. Input a cash outflow as a negative value and a cash inflow as a positive value. Enter your answers in dollars, not millions of dollars (e.g., 1,234,567). Round your answers to 2 decimal places (e.g., 32.16).)
  
  Coupon bond cash flow$ [removed] 
  Zero coupon bond cash flow$ [removed] 
To calculate the number of years until maturity, assume that it is currently May 2013.
RateMaturity
Mo/Yr
BidAskedChgAsk
Yld
??          May 18     103.5362     103.8235     +.3204        2.18      
5.850       May 23     104.1762     104.3850     +.4513        ??        
6.125       May 36     ??        ??        +.6821        3.87      
Required:
In the above table, find the Treasury bond that matures in May 2023. What is your yield to maturity if you buy this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Yield to maturity[removed]%  
Below, you will find Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2013.
RateMaturity
Mo/Yr
BidAskedChgAsk
Yld
??          May 18     103.5362     103.8235     +.3204        2.18      
5.850       May 23     104.1762     104.3850     +.4513        ??        
6.125       May 36     ??        ??        +.6821        3.87      
Requirement 1:
In the above table, find the Treasury bond that matures in May 2036. What is the asked price of this bond in dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Asked price$ [removed] 
Requirement 2:
If the bid-ask spread for this bond is .0628, what is the bid price in dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Bid price$ [removed] 
To calculate the number of years until maturity, assume that it is currently May 2013.
RateMaturity
Mo/Yr
BidAskedChgAsk
Yld
??          May 18     103.5362     103.8235     +.3204        2.18      
5.850       May 23     104.1762     104.3850     +.4513        ??        
6.125       May 36     ??        ??        +.6821        3.87      
Required:
In the above table, find the Treasury bond that matures in May 2018. What is the coupon rate for this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Coupon rate[removed]%  
To calculate the number of years until maturity, assume that it is currently January 15, 2013.
Company
(Ticker)
CouponMaturityLast
Price
Last
Yield
EST $ Vol
(000’s)
  Xenon, Inc. (XIC)5.400   Jan 15, 2020     94.183       ??       57,362      
  Kenny Corp. (KCC)7.125  Jan 15, 2017     ??          6.02      48,941      
  Williams Co. (WICO)??     Jan 15, 2026     94.735       6.85      43,802     
Required:
What is the yield to maturity for the bond issued by Xenon, Inc.? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g.,32.16).)
  Yield to maturity[removed]%  
To calculate the number of years until maturity, assume that it is currently January 15, 2013.
Company
(Ticker)
CouponMaturityLast
Price
Last
Yield
EST $ Vol
(000’s)
  Xenon, Inc. (XIC)5.400   Jan 15, 2020     94.183       ??       57,362      
  Kenny Corp. (KCC)7.125  Jan 15, 2017     ??          6.02      48,941      
  Williams Co. (WICO)??     Jan 15, 2026     94.735       6.85      43,802     
Requirement 1:
What price would you expect to pay for the Kenny Corp. bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Price$ [removed] 
Requirement 2:
What is the bond’s current yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Current yield[removed]%  
To calculate the number of years until maturity, assume that it is currently January 15, 2013.
Company
(Ticker)
CouponMaturityLast
Price
Last
Yield
EST $ Vol
(000’s)
  Xenon, Inc. (XIC)5.400   Jan 15, 2020     94.183       ??       57,362      
  Kenny Corp. (KCC)7.125  Jan 15, 2017     ??          6.02      48,941      
  Williams Co. (WICO)??     Jan 15, 2026     94.735       6.85      43,802     
Required:
What is the coupon rate for the Williams Co. bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Coupon rate[removed]%  
Nofal Corporation will pay a $4.60 per share dividend next year. The company pledges to increase its dividend by 6.75 percent per year, indefinitely.
Required:
If you require a return of 11 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Current stock price$ [removed] 
Raffalovich, Inc., is expected to maintain a constant 5.65 percent growth rate in its dividends, indefinitely.
Required:
If the company has a dividend yield of 4.15 percent, what is the required return on the company’s stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Required return[removed]%  
Suppose you know that a company’s stock currently sells for $66.10 per share and the required return on the stock is 9 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield.
Required:
If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Dividend per share$ [removed] 
E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today.
 
Required:
 
If you require a return of 8.75 percent on this stock, how much should you pay today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
 
  Current stock price$ [removed] 
Gontier Corporation stock currently sells for $64.73 per share. The market requires a return of 9 percent on the firm’s stock.
Required:
If the company maintains a constant 5.5 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  Dividend per share $ [removed] 
You’ve collected the following information from your favorite financial website.
 
52-Week PriceStock (Div)Div
Yld %
PE
Ratio
Close
Price
Net
Chg
HiLo
77.40       10.43         Palm Coal 0.362.6      6       13.90    –0.24    
55.96       33.57         Lake Lead Grp 1.694.2      10       40.58    –0.01    
130.93       69.50         SIR 2.002.2      10       88.97    3.07    
50.24       13.95         DR Dime 0.805.2      6       15.43    –0.26    
35.00       20.74         Candy Galore 0.321.5      28       ??      0.18    
 
Find the quote for the Lake Lead Group. Assume that the dividend is constant.
 
Requirement 1:
What was the highest dividend yield over the past year? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  
  Highest dividend yield[removed]%  
Requirement 2:
What was the lowest dividend yield over the past year? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
  
  Lowest dividend yield[removed]%  

Harvard Business School “Finance”

In general, the reduction of an asset is a source of funds. True or False 

==> The sustainable growth rate is the maximum growth rate achievable over an extended period of time. True or False 

==>The cash conversion cycle is calculated as:

Top of Form

Days in Inventory + Collection Period

Days in Inventory – Payables Period

Days in Inventory + Collection Period – Payables Period

None of the above

Bottom of Form

A company can shorten its cash cycle by:

Top of Form

Reducing inventory turnover

Reducing account payables

Reducing days receivable

None of the above

Bottom of Form

A company has a retention rate of 50%, sales of $25,000, beginning equity of $50,000 and profit margins of 10%, an asset turnover ratio of .75 and debt of $10,000. What is its sustainable growth rate?

Top of Form

2.5%

1.7%

3.75%

Not enough information given

Bottom of Form

Scenario analysis is a way of testing forecasts by changing one assumption at a time.

Top of Form

True

False

Bottom of Form

Biases can and should always be eliminated in financial forecasts.

Top of Form

True

False

Bottom of Form

Which of the following is commonly used in preparing pro forma statements:

Top of Form

Historical financial statements

Projected sales

Efficiency ratios

All of the above

Bottom of Form

Pro forma statements are:

Top of Form

Summaries of historical financial statements

Government-mandated analyses of financial statements

Projected statements used in financial planning

Estimated tax liabilities

Bottom of Form

Which of the following liabilities form part of a company’s “real” activities? 

     I. Short-term debt 
     II. Accounts payable 
     III. Accrued operating expenses 
     IV. Long-term debt

Top of Form

III only

II and III

I and IV

I only

Bottom of Form

Project’s Expected NPV And Standard Deviation Of NPV?

roblem 6 Problem 5 Problem 4 Problem 3 Problem 2 Problem 1 UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Probability NPV a. What are the project’s expected NPV and standard deviation of NPV? b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer. ANSWER PROBLEM 1 PROBLEM 2 PROBLEM 3 PROBLEM 4 PROBLEM 5 PROBLEM 6 Year Prob=0.2 Prob=0.6 cash flows are the expected cash flows in each year.) b. What are the project’s most likely, worst, and best case NPVs? c. Document Preview: Problem 6 Problem 5 Problem 4 Problem 3 Problem 2 Problem 1 UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Probability NPV a. What are the project’s expected NPV and standard deviation of NPV? b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer. ANSWER PROBLEM 1 PROBLEM 2 PROBLEM 3 PROBLEM 4 PROBLEM 5 PROBLEM 6 Year Prob=0.2 Prob=0.6 cash flows are the expected cash flows in each year.) b. What are the project’s most likely, worst, and best case NPVs? c. What is the project’s expected NPV on the basis of the scenario analysis? d. What is the project’s standard deviation of NPV? company’s policy is to adjust the corporate cost of capital up or down by 3 percentage points to account a. Perform a sensitivity analysis to see how NPV is affected by changes in the number of procedures per variables were number of procedures per day, average collection amount, and the equipment’s salvage Scenario Number of Procedures Average Collection Equipment Salvage Value Worst Most likely Best c. Finally, assume that California Health Center’s average project has a coefficient of variation of NPV in by the expected NPV.) The hospital adjusts for risk by adding or subtracting 3 percentage points to its hospital’s managers? The managers of United Medtronics are evaluating the following four projects for the coming budget Project Cost IRR A B C D a. What is the firm’s optimal capital budget? b. Now, suppose Medtronic’s managers want to consider differential risk in the capital budgeting process. Project A has average risk, B has below-average risk, C has above-average risk, and D has average managers lower the IRR of high-risk projects by 3 percentage points and raise the IRR of low-risk projects by the same amount.) Allied Managed Care Company is evaluating two different computer systems for handling provider claims. There are no incremental revenues attached.

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