Question 1
Directions: Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 20 points for this homework assignment. 1. Which of the following statements is CORRECT? a. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. b. It is generally easier to transfer one?s ownership interest in a partnership than in a corporation. c. One of the advantages of the corporate form of organization is that it avoids double taxation. d. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., ?one person, one vote.? e. Corporations of all types are subject to the corporate income tax. 2. Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy? a. Households start saving a larger percentage of their income. b. Households start saving a larger percentage of their income. c. The level of inflation begins to decline. d. Corporations step up their expansion plans and thus increase their demand for capital. e. The Federal Reserve uses monetary policy in an attempt to stimulate the economy. 3. Which of the following statements is CORRECT? a. If General Electric were to issue new stock this year it would be considered a secondary market transaction since the company already has stock outstanding. b. Capital market transactions only include preferred stock and common stock transactions. c. The distinguishing feature between spot markets versus futures markets transactions is the maturity of the investments. That is, spot market transactions involve securities that have maturities of less than one year, whereas futures markets transactions involve securities with maturities greater than one year. d. Both Nasdaq "dealers" and NYSE ?specialists? hold inventories of stocks. e. An electronic communications network (ECN) is a physical location exchange. 4. Which of the following statements is CORRECT? a. A good goal for a firm?s management is maximization of expected EPS. b. Most business in the U.S. is conducted by corporations, and corporations? popularity results primarily from their favorable tax treatment. c. Because most stock ownership is concentrated in the hands of a relatively small segment of society, firms' actions to maximize their stock prices have little benefit to society. d. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. e. The potential exists for agency conflicts between stockholders and managers. 5. Which of the following statements is NOT CORRECT? a. When a corporation?s shares are owned by a few individuals and are not traded on public markets, we say that the firm is ?closely, or privately, held." b. ?Going public? establishes a firm's true intrinsic value, and it also insures that a highly liquid market will always exist for the firm?s shares. c. When stock in a closely held corporation is offered to the public for the first time, the transaction is called ?going public,? and the market for such stock is called the new issue market. d. Publicly owned companies have shares owned by investors who are not associated with management, and public companies must register with and report to a regulatory agency such as the SEC. e. It is possible for a firm to go public and yet not raise any additional new capital at the time. ? Required Textbook Brigham, E. F. & Ehrhardt, M. C. (2010). Financial management. (13th ed.). Mason, OH: South-Western Cengage Learning,Thank you for your helping.,i attached to you chapter one hopefully help. thanks again for your help.,sorry never mind send in erro. thanks for your answer.,hello i attached to you chapter one for this assignment.and it can be paper and 1/2. thanks,i attached to you chapter one hopefully help you. thank you.
Question 2
P12-4 (Accounting for R&D Costs) During 2008, Robin Wright Tool Company purchased a building site for its proposed research and development laboratory at a cost of $60,000. Construction of the building was started in 2008. The building was completed on December 31, 2009, at a cost of $320,000 and was placed in service on January 2, 2010. The estimated useful life of the building for depreciation purposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated salvage value. Management estimates that about 50% of the projects of the research and development group will result in long-term benefits (i.e., at least 10 years) to the corporation. The remaining projects either benefit the current period or are abandoned before completion. A summary of the number of projects and the direct costs incurred in conjunction with the research and development activities for 2010 appears below. Number of Salaries and Other expenses(excluding Building Projects Employee Benefits Depreciation Charges) Completed Projects 15 $90,000 $50,000 with long-term benefits Abandoned projects or 10 $65,000 15,000 projects that benefits the current period Projects in process 5 40,000 12,000 results indeterminate Total 30 $195,000 $77,000 Upon recommendation of the research and development group, Robin Wright Tool Company acquired a patent for manufacturing rights at a cost of $88,000. The patent was acquired on April 1, 2009, and has an economic life of 10 years. Instructions If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements? (a). The company's income statement for 2010. (b). The company's balance sheet as of December 31, 2010. Be sure to give account titles and amounts, and briefly justify your presentation. (CMA adapted)
Question 3
7. Bouchard Company's stock sells for $20 per share, its last dividend (D0) was $1.00, its growth rate is a constant 6 percent, and the company would incur a flotation cost of 20 percent if it sold new common stock. Retained earnings for the coming year are expected to be $1,000,000, and the common equity ratio is 60 percent. If Bouchard has a capital budget of $2,000,000, what component cost of common equity will be built into the WACC for the last dollar of capital the company raises? (Points : 1) 11.30% 11.45% 11.80% 12.15% 12.63% 8. Diggin Tools just issued new preferred stock, which sold for $85 in the stock markets. Holders of the stock will receive an annual dividend equal to $9.35. The flotation costs associated with the new issue were 6 percent and Diggin's marginal tax rate is 30 percent. What is Diggin's cost of preferred stock, rps? (Points : 1) 11.0% 7.7% 8.2% 11.7% 10.3% 9. Allison Engines Corporation has established a target capital structure of 40 percent debt and 60 percent common equity. The firm expects to earn $600 in after-tax income during the coming year, and it will retain 40 percent of those earnings. The current market price of the firm's stock is P0 = $28; its last dividend was D0 = $2.20, and its expected dividend growth rate is 6 percent. Allison can issue new common stock at a 15 percent flotation cost. What will Allison's marginal cost of equity capital (not the WACC) be if it must fund a capital budget requiring $600 in total new capital? (Points : 1) 15.8% 13.9% 7.9% 14.3% 9.7% 10. SW Ink's preferred stock, which pays a $5 dividend each year, currently sells for $62.50. The company's marginal tax rate is 40 percent. What is the cost of preferred stock, rps, that should be included in the computation of the SW Ink's weighted average cost of capital (WACC)? (Points : 1) 8.0% 4.8% 3.2% The dividend growth rate is needed to compute rps; so not enough information is given to answer this question. None of the above is correct.,Please show your work. Thanks,Can you please show your work? Thanks
Question 4
6. Dye Company can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $96 and takes two machine hours to make and Fancy has a unit contribution margin of $120 and takes three machine hours to make. There are 2,400 machine hours available to manufacture a product. What should Dye do? (Points: 2) Make Fancy which creates $24 more profit per unit than Plain does. Make Plain which creates $8 more profit per machine hour than Fancy does. Make Plain because more units can be made and sold than Fancy. The same total profits exist regardless of which product is made. 7. What is the key factor in determining sales mix if a company has limited resources? (Points: 2) Contribution margin per unit of limited resource The amount of fixed costs per unit Total contribution margin The cost of limited resources 8. Cost structure (Points: 2) refers to the relative proportion of fixed versus variable costs that a company incurs. generally has little impact on profitability. cannot be significantly changed by companies. refers to the relative proportion of operating versus nonoperating costs that a company incurs. 9. Reducing reliance on human workers and instead investing heavily in computers and online technology will (Points: 2) reduce fixed costs and increase variable costs. reduce variable costs and increase fixed costs. have no effect on the relative proportion of fixed and variable costs. make the company less susceptible to economic swings. 10. The margin of safety ratio (Points: 2) is computed as actual sales divided by break-even sales. indicates what percent decline in sales could be sustained before the company would operate at a loss.
Question 5
Following are the requirements and steps for the Week 3 assignment. 1 Complete the 2006% of sales calculations. 2005 % of sales has been calculated as an example. 2 Answer this question: why is the % of sales for sales 100%? We will now step through each assumption provided in the New Strategic Initiative Assumptions Memo (the original). For each assumption, please indicate which line items on the income statement and balance sheet would be directly impacted by the assumption. Line item reference numbers are provided in Column B of the historical statements. Assumption 1 has been completed as an example. Assumption 3 Assume inflation of 4% on expenses, not including depreciation and taxes. This is in addition to the This is in addition to the new initiative's costs.. 4 Assume the following regarding variables versus fixed-nature-of-income-statement operating expenses for the existing business: a. 80% of wage benefits is variable and 20% is fixed. b. 100% of fuel expenses, purchased transportation, and operating supplies is variable. c. 100% of operating taxes is fixed. d. 20% of insurance and claims is fixed; the balance is variable. e. Assume depreciation, even with new expenditures, is fixed as the retirement of written-off assets, equaling new equipment. 5 There will be new spending areas reflected on future budgets to reflect added satellite warehouse costs and space rental and costs of running the locations. a. In the first year, add $10 million of inflation, space rental, and operating costs at 25% of revenues from the new initiative. b. In the second year, add $10 million space rental, with inflation at the same variable percentage of sales. c. In the third year, add $7.5 million of the variable percentage of sales. 6 In marketing, budget accounts have been added for new incurred costs. We will continue our present promotion and launch a new program, with the assistance of our marketing partner, the ABC Marketing Agency. They will advise us on the type, frequency, and content of new messages. Assume 100% of the existing budget is fixed with respect to volume along with new expenses. We expect incremental expenses, with $5 million of inflation in the first three years. 7 Our existing sales force, comprised of four national account managers, will call on clients such as Wal-Mart?, Sears?, and Best Buy?. Existing expenses are assumed to be 100% fixed in relation to revenue. To tap into specialized markets, our strategy is aimed at adding four industry-specific managers, each with a salary base of $50,000 and 2% commission of generated revenues. 8 The human resources budget will not change substantially aside from added hiring, recruiting, training, and drug testing fees. Assume 10% of expenses is fixed; the balance is variable with volume. 9 Assume current assets and liabilities are variable. Expect an addition of $10 million to operating property, spent in the first year. Our payment to vendors, suppliers, and taxes will be in thirty-day terms. We expect all payments to be in sixty-day terms. 10 Assume revenue growth from our existing business will grow at 8% versus 10% in past years. Our new strategy, however, adds incremental consulting revenues of $3.5, $4.5, and $6.5 million in the first, second, and third years. New warehousing will add revenue of $10, $30, and $40 million in the first, second, and third years. All new revenue will be subject to commissions for industry-specific managers. 11 Using 2006 data, calculate the current ratio. 12 Using 2006 data, calculate the profit percentage 13 Using 2006 data, calculate the debt to asset ratio 14 Explain how EFN can be calculated using the income statement and balance sheet. 15 Complete the 2007 pro forma statements (income statement and balance sheet) using the following guidelines: Sales increase 10% from 2006. Use line items 5 and 9 to determine which expenses are variable (change with sales) and which are fixed. 16 Does Huffman need to borrow money? That would be your EFN calculation,where did the 8% come from? The original spreadsheet I submitted had questions on the first tab as weel that were not addressed and again on the question I submitted it was supposed to be an increase of 10% in sales. Also it was for one year, not three. Please clarify.
