Question 1
1.A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price? a- $17.39 b- $17.84 c- $18.29 d- $18.75 e- $19.22 2. If D1 = $1.25, g (which is constant) = 5.5%, and P0 = $44, what is the stock?s expected total return for the coming year? a- 7.54% b- 7.73% c- 7.93% d- 8.13% e- 8.34% 3. Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? a- $104.27 b- $106.95 c- $109.69 d- $112.50 e- $115.38 4. Bankston Corporation forecasts that if all of its existing financial policies are followed, its proposed capital budget would be so large that it would have to issue new common stock. Since new stock has a higher cost than retained earnings, Bankston would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock? (a)- Increase the dividend payout ratio for the upcoming year. (b)-Increase the percentage of debt in the target capital structure. (c)-Increase the proposed capital budget. (d)-Reduce the amount of short-term bank debt in order to increase the current ratio. (e)-Reduce the percentage of debt in the target capital structure. 5. Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A?s cost of capital is 10.0%, Division B?s cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A?s projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept? (Points: 10) a- A Division B project with a 13% return. b- A Division B project with a 12% return. c- A Division A project with an 11% return. d- A Division A project with a 9% return. e- A Division B project with an 11% return. Please show the computation for every answer. " - Sent to Accounting Expert Tutor on 2/2/2011 at 5:10pm You asked: ""1.A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price? a- $17.39 b- $17.84 c- $18.29 d- $18.75 e- $19.22 2. If D1 = $1.25, g (which is constant) = 5.5%, and P0 = $44, what is the stock?s expected total return for the coming year? a- 7.54% b- 7.73% c- 7.93% d- 8.13% e- 8.34% 3. Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? a- $104.27 b- $106.95 c- $109.69 d- $112.50 e- $115.38 4. Bankston Corporation forecasts that if all of its existing financial policies are followed, its proposed capital budget would be so large that it would have to issue new common stock. Since new stock has a higher cost than retained earnings, Bankston would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock? (a)- Increase the dividend payout ratio for the upcoming year. (b)-Increase the percentage of debt in the target capital structure. (c)-Increase the proposed capital budget. (d)-Reduce the amount of short-term bank debt in order to increase the current ratio. (e)-Reduce the percentage of debt in the target capital structure. 5. Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A?s cost of capital is 10.0%, Division B?s cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A?s projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept? (Points: 10) a- A Division B project with a 13% return. b- A Division B project with a 12% return. c- A Division A project with an 11% return. d- A Division A project with a 9% return. e- A Division B project with an 11% return. Please show the computation for every answer.
Question 2
1.Express Delivery Company acquired an adjacent lot to construct a new warehouse, paying $80,000 and giving a short-term note for $620,000. Legal fees paid were $1,900, delinquent taxes assumed were $9,000, and fees paid to remove an old building from the land were $6,000. Materials salvaged from the demolition of the building were sold for $1,175. A contractor was paid $800,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet. Please show work so I can better understand. 2. Hometown Delivery Co. incurred the following costs related to trucks and vans used in operating its delivery service: 1.Changed the oil and greased the joints of all the trucks and vans. 2.Changed the radiator fluid on a truck that had been in service for the past four years. 3.Installed a hydraulic lift to a van. 4.Installed security systems on four of the newer trucks. 5.Overhauled the engine on one of the trucks purchased three years ago. 6. Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no longer under warranty. 7.Removed a two-way radio from one of the trucks and installed a new radio with a greater range of communication. 8.Repaired a flat tire on one of the vans. 9. Replaced a truck's suspension system with a new suspension system that allows for the delivery of heavier loads. 10.Tinted the back and side windows of one of the vans to discourage theft of contents. Classify each of the costs as a capital expenditure or a revenue expenditure. 3. A refrigerator used by a meat processor has a cost of $86,750, an estimated residual value of $7,500, and an estimated useful life of 25 years. What is the amount of the annual depreciation computed by the straight-line method. Please show work so that I can better understand.
Question 3
Continuing Cookie Chronicle 1 Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 8.) CCC9 Part 1 Now that she is selling mixers and her customers can use credit cards to pay for them, Natalie is thinking of upgrading her website to include the online sale of mixers and payment by credit card. This would enable her to sell these mixers to a wider range of customers using the Internet. Natalie contacts her brother who originally prepared the website for her. He agrees to upgrade the site so it can handle credit card security issues as well as direct order entry. The cost of the upgrade is $1,800. This cost would be incurred and paid for during the month of August 2012, and the upgrade would be operational September 1, 2012. Recall that Natalie?s website had an original cost of $600 and is being amortized using the straightline method over 24 months, starting December 1, 2011, with zero residual value. Additional costs for website maintenance and insurance are estimated to be $1,200 per year. If Natalie decides to upgrade the website, its useful life will not change and there will be no change in residual value. Instructions (a) Prepare the journal entry to record the upgrade. (b) Calculate the monthly amortization expense before the upgrade and the accumulated amortization and book value on August 31, 2012. (c) Calculate the revised monthly amortization expense as of September 1, 2012. (d) Calculate the accumulated amortization and book value on December 31, 2012. (e) Explain to Natalie the difference in accounting for the website upgrade costs and accounting for the costs incurred for website maintenance and insurance. In your explanation, comment on the generally accepted accounting principles that affect the accounting for these transactions. Part 2 Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $38,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last her about 5 years, and she expects to drive it for 100,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $6,500. Assume that she will buy the van on August 15, 2012, and it will be ready for use on September 1, 2012. Natalie is concerned about the impact of the van?s cost on her income statement and balance sheet. She has come to you for advice on calculating the van?s depreciation. Instructions (a) Determine the cost of the van. (b) Prepare a depreciation table for straight-line depreciation (similar to the one in Illustration 9-9). Recall that Cookie Creations has a December 31 fiscal year-end. (c) What method should Natalie use for tax purposes? Provide a justification for your choice. Is she required to use the same approach for financial reporting and tax reporting?
Question 4
From the end of Chapter 12, complete Study Problems 12-1 and 12-5. Post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Please find the website that goes alongside the textbook listed below: . http://wps.prenhall.com/bp_keown_fof_7/144/37020/9477271.cw/index.html 12-1. Distinguish between business risk and financial risk. What gives rise to, or causes, each type of risk? 12-5. A break-even analysis assumes linear revenue and cost functions. In reality, these linear functions deviate over large output and sales levels. Why? PLEASE SHOW ALL STEPS AND EXPLAIN ANSWER,From the end of Chapter 12, complete Study Problems 12-1 and 12-5. Post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. 12-1. Distinguish between business risk and financial risk. What gives rise to, or causes, each type of risk? PROBLEM 12-1 LEVERAGE ANALYSIS DATA Sales 50,439,375 Variable Costs 25,137,000 Revenue before fixed costs 25,302,375 Fixed Costs 10,143,000 EBIT 15,159,375 Interest expense 1,488,375 EBT 13,671,000 Taxes 6,835,500 Net Income 6,835,500 Operating leverage = Financial leverage = Combined leverage = A) Breakeven point = B) Sales increase 30% % of Earnings increase =
Question 5
Using your readings, the Library, and the Internet, and any additional resources necessary, you are being asked to complete the following sections of a Strategic Audit (See examples starting on page 78 and pages 179-185 following appendix 11.C): Analysis of Strategic Factors. Since you are aware that your analysis of strategic factors or SFAS (Strategic Factor Analysis Summary) is based on IFAS and EFAS tables, and since we will need to understand your choices, you are required to submit the three tables in Excel format in one separate file from your written Word assignment. Non submission of an Excel file or submission of a table in a Word file will cause you to lose half of the points of this assignment. No comments are needed on the IFAS and the EFAS tables, but comments are needed on the SFAS table, which is the foundation for this assignment (You will submit one Excel file that will include three separate sheets, one for the IFAS, one for the EFAS and one for the SFAS). As a reminder, two files are to be submitted: One Excel file (counting for three pages) and one Word file (five to seven pages double-spaced). You will be graded on your knowledge of the software and math in building the MS Excel tables, and on your ability to communicate in writing and present your arguments. Strategic Alternatives and Recommended Strategy Here you will be graded on your ability to analyze economic, socio-cultural, political-legal, technological, and financial data to justify your available strategies and the one(s) you recommend. Implementation: Describe the implementation of the strategy(ies) you recommended. Evaluation and Control: How do you evaluate the performance of your implemented strategy(ies)? For a sample outline of a Strategic Audit, review examples starting on page 78 and appendix 11.C.
