Question 1
Key Assignment Your final assignment as a financial management intern is to apply the knowledge that you acquired while engaging in the cost of capital and capital budgeting discussion you had with your colleagues. In this task, you will be evaluating a capital project using the weighted cost of capital for a firm using the market value rather than the book value of the components and the capital budgeting techniques presented in this phase. First, recalculate the weighted average cost of capital (WACC) using the market value of equity to determine are more realistic cost of capital. You will need to visit a Web site to get the current value of the common stock price per share and multiply this value times the most recent number of shares of common stock outstanding. In this exercise, you will be ignoring preferred stock because its weight value will most likely be too low to impact the final result. You may use the following table to complete this portion of the task: Company Common Stock, price per share Number of Common Shares Outstanding Market Value of Common Equity Now, you can estimate the total market value of the company by adding the book value of total liabilities to the market value of the firm?s common equity and determine their market value weights. Company Total Liabilities Market Value of Common Equity Market Value of the Firm Values Weights Using the cost of each component as determined in the Phase 4 IP, calculate the firm's market value WACC. After-Tax Cost of Debt Cost of Common Equity WACC Unweighted Cost Market Weight of Component Market Weighted Cost of Component The firm is considering investing in a capital project that will have an initial cost of $12 million. The project is expected to have a productive life of 5 years, and at the end of this period, it is expected to have a salvage value of $2 million. The net value of the project will be depreciated using the straight-line method for the full 5 years. The project is expected to increase the firm?s revenue by $10 million per year, and related expenses (not including depreciation) are expected to increase by about $6.5 million per year. The first thing you need to do is calculate the annual depreciation. Feel free to use the following table: Initial Investment less Salvage Value Depreciable Value Life of Project (years) Depreciation/year Now, you need to calculate the relevant cash flows for the project. You can use the average tax rate that was calculated in Phase 4 to determine the additional taxes the firm will have to pay. The following template may be of some assistance to you: Years 0 1 2 3 4 5 Initial Investment (negative) Increase in Revenue Less Increase in Operating Expenses Increase in Operating Income Less Depreciation/year Taxable Income Less Taxes at Average Rate Net Income Plus Depreciation/year Operating Cash Flow Plus Salvage Value (Year 5) Relevant Cash Flows (0?5) At this point, you are ready to apply the capital budgeting techniques of net present value (NPV) and the internal rate of return (IRR). To calculate the NPV, use the market-value WACC as your discount rate and the required rate of return for IRR.
Question 2
"2)Par lnc. reported the following pretax income (loss) and related tax rates during the years 2002-2008. Pretax income (loss) Tax Rate 2002 $40,000 30% 2003 25,000 30% 2004 60,000 30% 2005 80,000 40% 2006 (200,000) 40% 2007 70,000 40% 2008 90,000 35% Pretax financial income (loss) and taxable income (loss) were the same for all years since Par began business. The tax rates from 2005-2008 were enacted in 2005. a) Prepare the journal entries for years 2006-2008 to record income tax payable (refundable), income tax expense (benefit), and the tax effects of the loss carryback and carryforward. Assume that Par elects the carryback provision where possible and expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year. (15 points) b) Indicate the effect the 2006 entry (ies) has on the December 31, 2006, balance sheet. (1 0 points) c) Prepare the portion of the income statement, starting with "Operating loss before income taxes," for 2006. (5 points) d) Prepare the portion of the income statement, starting with "Income before income taxes," for 2007. (1 0 points) 3) Deines Corp. sponsors a defined-benefit pension plan for its employees. On January 1, 201 2, the following balances related to this plan. Plan assets (market-related value) $450,000 Projected benefit obligation 600,000 Pension asset/liability 150,000 Cr. Prior service cost 75,000 OCI - LOSS 65,000 As a result of the operation of the plan during 2012, the actuary provided the following additional data at December 31, 2012. Service cost for 2012 $ 75,000 Actual return on plan assets in 2012 45,000 Amortization of prior service cost 20,000 Contributions in 2012 115,000 Benefits paid retirees in 2012 70,000 Settlement rate 7% Expected return rate 8% Average remaining service life of active employees 10 years Instructions (a) Compute pension expense for Deines Corp. for the year 201 2 by preparing a pension worksheet. (30 points) (b) Prepare the journal entry for pension expense. (1 0 points),I changed duo date is ok for you ?
Question 3
About Wal-Mart financial analysis In this assignment, assume you are a savvy financial analyst researching companies in which to invest. Select a U.S. publically-traded company you think might be a good investment and perform a financial analysis. Your analysis should include the following: ? Company Overview. Conduct research and describe the company, its operations, locations, markets, and lines of business. Collect financial statements for the past three (3) years, fiscal or calendar (please insert these in the appendix). These financial statements must include at least the income statement and the balance sheet. ? Evaluate the company?s vulnerability to current financial threats such as a recession, higher interest rates, and global competition. ? Financial Performance. Based on the financial trends of the company, predict how these trends will impact financial performance in future periods. Explain your rationale for this prediction. ? Stock Price Analysis. Given the performance of the stock in the periods presented on the company?s financial statements, discuss how the stock is likely to perform in the future, what type of investor would be drawn to this stock, and make a recommendation to management to improve stock performance. Submit your analysis in the form of a 6-8 page paper in which you: 1. Provide a detailed overview of a U.S. publicly traded company. This should be one to two (1-2) pages. 2. Evaluate the company?s vulnerability to current financial threats such as a recession, higher interest rates, and global competition. 3. Based on the financial trends of the company, predict how these trends will impact financial performance in future periods. Explain your rationale for this prediction. 4. Cite at least five (5) quality references.
Question 4
"MRI Company has one employee. FICA Social Security taxes are 6.2% of the first $106,800 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For MRI, its FUTA taxes are 0.8% and SUTA taxes are 2.9% of the first $7,000 paid to its employee. Gross Pay through August Gross Pay for September a. $ 6,400 $800 b. 18,200 2,100 c. 100,500 8,000 (1) Using the data in situation a of the above problem, prepare the employer's September 30 journal entries to record salary expense and its related payroll liabilities for this employee. The employee's federal income taxes withheld by the employer are $135 for this pay period. " (2) Using the data in situation a of above exercise, prepare the employer?s September 30 journal entries to record the employer?s payroll taxes expense and its related liabilities.,This question is requesting to prepare journal entries: prepare the employer's September 30 journal entries to record salary expense and its related payroll liabilities for this employee. The employee's federal income taxes withheld by the employer are $135 for this pay period. " and prepare the employer?s September 30 journal entries to record the employer?s payroll taxes expense and its related liabilities. The answer does not show journal entries.
Question 5
"Below topic is given for assignment. Every student should prepare 750 to 1000 words write up. One of class mate (Robert Storer) have submitted the attached solutions. Can you read the attached and solution, ask few provoking questions with below guide lines. (required response in 2 paragraph) please refer as question I'd:7431898 for sample. ? Ask a probing question. ? Share an insight from having read the attached solution. ? Offer and support an opinion or suggestion. ? Validate an idea with your own experience. ? Expand on the ideas in attached solutions Topic: A friend has asked you for some advice: "My small business now makes a profit; I am only too aware of this, as I now face a big tax bill each year, when my tax accountant has prepared my annual accounts. However, I don't feel much better off personally, so this is not quite what I had expected when I took the risk of resigning my job and setting up my own firm. The accountant is now trying to persuade me to pay her even higher fees, by letting her prepare monthly 'management accounts' for me. She says that I would also benefit from something called CVP analysis on my various product lines. I know that you are now doing an MBA. What does she mean here, and is this likely to be worth my paying her for?" Outline the differences between financial reporting and managerial accounting information and explain the benefits and potential problems associated with cost?volume?profit (CVP) analysis. How might the technique that you have discussed assist your friend in the effective management of his business' resources? What advice would you give him? ******************************************************** Solution: To understand the differences between financial reporting and management accounting we will establish what both are. Financial reporting is an umbrella covering the money within the company; it may be in a form of a financial statement, balance sheet, profit and loss, or any other extravagant options that are available. The primary function of financial reporting is to inform stakeholders on how, where, and what the monies of the company are distrusted. Allowing stakeholders to view assets verses liabilities, if the company is making a profit, where the original capital is and if any more has been invested, and the financial outlook for the future. All of these results and answers are used for two main purposes, taxes and stakeholders. However, the findings are used for many other functions, such as, comparison of competition and historical tracking of trends. Managerial accounting is designed to provide accounting information within the organization enabling the decision makers to make informed choices with both the management and control systems (Ittner and Larcker 2001). This umbrella includes break-even point analysis, profit-volume chart, marginal analysis, and cost volume profit. With these reports they stay in house, meaning they are private and not for the public eye. The differences between financial reporting and managerial accounting are: Financial reporting is made with the intentions stakeholders? will see results. Managerial accounting is private, held in house by decision makers. Financial reporting is historical data recorded tracking the past spending and receiving habits of the company. This information is processed for taxes and deciphering where the assets are. With this information you have visible evidence of the solvency of a company, allowing the prediction of future growth. Managerial accounting is future driven; framework is designed to understand how to position the control systems in a position to maximize future opportunity. Financial reporting follows set accounting boundaries established by the governing entities. Management accounting is a revolving report established by the needs and want of the decision makers. Each system is accompanied by an abundance of benefit. Financial reporting, besides being a must, will benefit your company by giving you a historical reference guide allowing you to see the swings in the market by year, season, or month. Also, allowing you to be translucent for your stakeholders creating better rapport and establishing trust. Above all else, you will be able to know where your company sits in relation to assets verse liability, debt ratio, operating ratio, working capital, and solvency among others. Management accounting is useful when establishing and reinventing control systems within the company. Additionally, it gives an opportunity for the company to run more than one report allowing the company assesses the effectiveness (Atrill and McLaney, 2011). The understanding of these assorted reports allows managers to make informed decisions for the future considering the financial results. The relationship of the financial understanding and controllable actions is a must to run optimally while maximizing efforts. In particular your accountant mentioned the use of CVP analysis. CVP is cost volume profit analysis used to differentiate actions and results of producing, pricing, and selling. A holistic view of the production operations within the company with a premium placed on price for profit concept. This tool is also useful for identifying opportunities for streamlining current tactics, like outsourcing or adding to existing products and even replacing variable costs with fixed costs (Chrysafis and Papadopoulos, 2009). The framework allows for both fixed and variable costs and both the cost and revenue are shown as linear. CVP can help you determine the effects of changes in volume or costs allowing an educated assessment of your current state and make appropriate choices for the future. Although, the framework will allow a mixture of products it does not distinguish the relative amount of a particular product to the total sale. The result of blending product pricing and cost together will not give a completely accurate account for your total portfolio, but an overview of the company in a generalized manner. However, it can still signal out faulty operation actions. The aim of this framework is short-term remedy not for long-term scrutiny. Although, there are identifiable flaws within this option it is a good start for a young company. Because of the generality of CVP it allows for elementary understanding and deviation of the report can be spawn giving more specific results. The incorporation of systematic assessments will lead to a more efficient operation allowing identifiable opportunities to be achieved with full understanding of the financial consequence. My advice would be to incorporate CVP as an added expense to better position the company for the future. In addition, break-even point (BEP) will need to be identified for continued success. Since they were unaware they made a profit last year, I would venture to say the benefits of CVP at this stage would be much more useful than just discovering costs effects on profit, but allowing a deeper understanding of all his business processes including the BEP. Bibliography Atrill, P. & McLaney, E. (2011) Finance and accounting for managers. Laureate Online Education custom ed. Harlow, UK: Pearson Custom Publishing. Chrysafis, K, & Papadopoulos, B 2009, 'Cost-volume-profit analysis under uncertainty: a model with fuzzy estimators based on confidence intervals', INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH, 47, 21, pp. 5977-5999 [Online]. Available from: http://ehis.ebscohost.com.ezproxy.liv.ac.uk/eds/pdfviewer/pdfviewer?vid=7&hid=120&sid=f8974125-6e2c-466f-9784-d63653b13d67%40sessionmgr115. (Accessed on: 17 September 2011). Ittner, C & Larcker, D (2001) ?Assessing empirical research in managerial accounting: a value-based management perspective? Journal of Accounting and Economics [Online]. Available from: http://miha.ef.uni-lj.si/_dokumenti3plus2/196128/Ittner,Larcker-2001-AssessingempiricalresearchinMA.pdf. (Accessed on: 17 September 2011). "
