Question 1
Dear Tutor, please can you assist with the following questions. I would also appreciate it if you can provide the calculations you used. 1. A firm has current assets of $200, net fixed assets of $400, accounts payable of $150, long-term debt of $150, equity of $300, sales of $2,000, costs of $1,500, and a tax rate of 34 percent. Assume costs and assets increase at the same rate as sales. Also assume that 40 percent of net income is retained. The current debt-equity ratio is considered optimal and no new equity sales are possible. What is the maximum rate of growth given this information? a) 17.5 percent b) 19.4 percent c) 21.4 percent d) 25.8 percent 2. A firm has net income of $200, total assets of $1,200, and total liabilities of $400. The total asset turnover ratio is 3. What is the sustainable growth rate assuming dividends paid total $60? a) 13.8 percent b) 11.5 percent c) 16.2 percent d) 21.2 percent 3. A firm has 2,000,000 shares of common stock outstanding with a market price of $2.00 each. It has 2,000 bonds outstanding, each with a market value of $1,200 (120 percent of face). The bonds mature in 15 years, have a coupon rate of 10 percent, and pay coupons annually. The firm's beta is 1.2, the risk free rate is 5 percent, and the market risk premium is 7 percent. The tax rate is 34 percent. Compute the WACC. a) 5.42 percent b) 6.53 percent c) 9.36 percent d) 10.28 percent 4. Hartley Psychiatric, Inc. needs to purchase office equipment for its 2000 drive-in therapy centers nationwide. The total cost of the equipment is $2 million. It is estimated that the after-tax cash inflows from the project will be $210,000 annually forever. Hartley has a debt-to-value ratio of 40 percent based on market values. The firm's cost of equity is 13 percent and its pre-tax cost of debt is 8 percent. The flotation costs of debt and equity are 2 percent and 8 percent, respectively. Assume the firm's tax rate is 35 percent. What is the dollar flotation cost for the proposed financing? a) $112,000 b) $118,644 c) $131,230 d) $152,098 5. The current spot rate between "euroland" and the U.S. is ?.82 per $1.00. Expected inflation in "euroland" is 6 percent per year and expected inflation in the U.S. is 3 percent per year. If relative purchasing power parity holds, what is the expected exchange rate in 4 years? a) ?.870 per $1.00 b) ?.896 per $1.00 c) ?.923 per $1.00 d) ?.951 per $1.00,Dear Tutor, My questions are due in the next three hours. Would greatly appreciate urgent assistance. Tovah,Hi Rachel, Thank you for accepting my assignment and I look forward to your assistance. Kind regards, Tovah
Question 2
Name Costing, Budgeting and Internal Reporting Congratulations! You have been hired by Eastvaco as Plant Controller for the Charlotte facility. Your resume includes both financial and managerial accounting experience. You have had extensive experience in accounting for several manufacturing companies. You accepted this current position since it represents a substantial increase in responsibilities and you are eager to impress Sue and Tom. Sue, the Company Controller, has given you an extensive project. Eastvaco has enjoyed greater than industry average revenue, net income and cash flow. The Charlotte facility, initially, had a near monopoly on ?green? stationary. Green stationary is constructed from recycled materials and reforested trees. Unfortunately, that is no longer the case. Due to increased pressure from competition the current business model is no longer producing satisfactory results. Eastvaco operates in a decentralized manner with each facility being treated as an investment center. You are shocked to find that the previous plant controller did not actively participate in financial planning since the Company and, the Charlotte plant in particular, was doing so well it was thought that it was not needed. Sue explained that, due to the reduced revenue and profit margins, the Company was seeking a large bank loan specifically for the Charlotte facility. As part of the loan process the bank is requiring a budget. During your meeting with Sue you received a brief history of Eastvaco and the Charlotte Subsidiary. You listen intently has Sue gives you the following overview. Eastvaco Corporation, a Delaware Corporation incorporated in the early 1900s is one of the major producers of paper and paperboard in the United States. The company converts paper and paperboard into a variety of end products, manufactures a variety of specialty chemicals, produces lumber, sells timber from its timberlands and is engaged in land development. In Brazil, it is a major producer of paperboard and corrugated packaging for the markets of that country and also operates a folding carton plant. Eastvaco also has a folding carton plant in the Czech Republic. Eastvaco exports products from the United States, Brazil and the Czech Republic to other countries throughout the world. The Charlotte facility was created in the late 1980?s whose mission was to produce high quality, environmental friendly, paper products. The Company believed, due to the substantial EPA violations and public opinion regarding the environment, that a cutting edge, low carbon footprint plant needed to be built. The Company uses the Charlotte facility as their premier plant and is used in much of their public relation campaigns. In the beginning the plant was enjoying a comfortable market share of green paper products. This was due to extensive advertising and relatively little competition in the use of green technology. The previous controller, Jim Person, had been with the Company for 28 years. While experienced and knowledgeable, he often relied on outdated methods of gathering information. He did not utilize all available information and reports (other than required financial reports) were not very extensive. In particular, internal reports and analyses were not considered a high priority. Sue continues explaining that ?those times are over.? We need more and better internal reporting. The Charlotte plant is no longer enjoying the large market share it once experienced. Also, revenue, net income and cash flow have declined. ?This is unacceptable to the CEO and Board of Directors and must be addressed.? The Board has authorized a large bank loan to upgrade facilities but due to the previous controller?s attitude, we simply do not have the required reports that will likely be required by banks. Sue has provided you with a complete set of financial statements, complete with Charlotte specific financial information. She strongly suggests that you begin by reading the complete set of statements that Eastvaco included in their SEC 10K report. After an intensive analyses of available information you prepared al budget worksheet. The following information is provided: fixed cost for 2007 totaled $6.5 Million, variable cost for envelopes is $15.3 Million, cups is $9.3 Million and packaging is $3.3 Million. Sue provided the following information. The envelopes and cups consist of various colors and sizes. You have not attempted to prepare any budgets by individual product lines. Fixed overhead consist of two categories of costs, depreciation and miscellaneous (taxes, supervisor salaries, etc.) Each category is allocated to individual product lines in proportion to estimated sales value of the goods produced in each year. The association between variable manufacturing costs and sales is based on actual activity in the latest year. It is estimated that general and administrative expenses will remain constant. The previous expenditure (10% of the prior year year?s total sales) for marketing will also remain constant. The anticipated bank loan will carry a 7% interest rate. After reviewing the above analyses and schedule Sue has some additional task and questions. You are to respond to the following inquiries. REQUIREMENTS: 1. Sue ask for you to prepare a well organized and formatted schedule showing what the variable manufacturing cost is, as a percentage of total sales, for each of the three product lines for 2007. Sales were Envelopes = $18M, Cups = $11.6M and Packaging = $6.6M Total Sales = $36.2 M 2. Calculate the 2007 weighted average contribution margin. 3. Calculate breakeven in dollars for 2007. (Hint: You will need the information from previous requirements.) Additional Information: The home office rejected your proposed budget. This is based on their belief that the loan would not be granted based on your budget. The Plant Manager offers an alternate plan. He wants to increase the advertising budget to $3.8 million (was$3.6M). This he thinks will cause an increase in sales. This would bring sales to $19 million for envelopes, $13 million for cups and $8 million for packaging and create enough profit to have the loan approved. Assume that the advertising cost is treated as a fixed cost. 4. Given the comments above, how much would the company?s profit increase? (Hint, use the weighted average contribution margin you calculated in requirement #3. Calculate increase in revenue after additional variable costs then subtract additional fixed cost) 5. What other ways could you allocate fixed manufacturing costs?,Congratulations! You have been hired by Eastvaco as Plant Controller for the Charlotte facility. Your resume includes both financial and managerial accounting experience. You have had extensive experience in accounting for several manufacturing companies. You accepted this current position since it represents a substantial increase in responsibilities and you are eager to impress Sue and Tom. Sue, the Company Controller, has given you an extensive project. Eastvaco has enjoyed greater than industry average revenue, net income and cash flow. The Charlotte facility, initially, had a near monopoly on ?green? stationary. Green stationary is constructed from recycled materials and reforested trees. Unfortunately, that is no longer the case. Due to increased pressure from competition the current business model is no longer producing satisfactory results. Eastvaco operates in a decentralized manner with each facility being treated as an investment center. You are shocked to find that the previous plant controller did not actively participate in financial planning since the Company and, the Charlotte plant in particular, was doing so well it was thought that it was not needed. Sue explained that, due to the reduced revenue and profit margins, the Company was seeking a large bank loan specifically for the Charlotte facility. As part of the loan process the bank is requiring a budget. During your meeting with Sue you received a brief history of Eastvaco and the Charlotte Subsidiary. You listen intently has Sue gives you the following overview. Eastvaco Corporation, a Delaware Corporation incorporated in the early 1900s is one of the major producers of paper and paperboard in the United States. The company converts paper and paperboard into a variety of end products, manufactures a variety of specialty chemicals, produces lumber, sells timber from its timberlands and is engaged in land development. In Brazil, it is a major producer of paperboard and corrugated packaging for the markets of that country and also operates a folding carton plant. Eastvaco also has a folding carton plant in the Czech Republic. Eastvaco exports products from the United States, Brazil and the Czech Republic to other countries throughout the world. The Charlotte facility was created in the late 1980?s whose mission was to produce high quality, environmental friendly, paper products. The Company believed, due to the substantial EPA violations and public opinion regarding the environment, that a cutting edge, low carbon footprint plant needed to be built. The Company uses the Charlotte facility as their premier plant and is used in much of their public relation campaigns. In the beginning the plant was enjoying a comfortable market share of green paper products. This was due to extensive advertising and relatively little competition in the use of green technology. The previous controller, Jim Person, had been with the Company for 28 years. While experienced and knowledgeable, he often relied on outdated methods of gathering information. He did not utilize all available information and reports (other than required financial reports) were not very extensive. In particular, internal reports and analyses were not considered a high priority. Sue continues explaining that ?those times are over.? We need more and better internal reporting. The Charlotte plant is no longer enjoying the large market share it once experienced. Also, revenue, net income and cash flow have declined. ?This is unacceptable to the CEO and Board of Directors and must be addressed.? The Board has authorized a large bank loan to upgrade facilities but due to the previous controller?s attitude, we simply do not have the required reports that will likely be required by banks. Sue has provided you with a complete set of financial statements, complete with Charlotte specific financial information. She strongly suggests that you begin by reading the complete set of statements that Eastvaco included in their SEC 10K report. After an intensive analyses of available information you prepared an excel worksheet (see excel worksheet): In addition to the excel worksheet schedules you provide Sue the following information. The envelopes and cups consist of various colors and sizes. You have not attempted to prepare any budgets by individual product lines. It is estimated that general and administrative expenses will remain constant. The previous expenditure (10% of the prior year year?s total sales) for marketing will also remain constant. The anticipated bank loan will carry a 7% interest rate. After reviewing the above analyses and schedules Sue has some additional task and questions. You are to respond to the following inquiries. REQUIREMENTS: 1. Sue ask for you to prepare a well organized and formatted schedule showing what the variable manufacturing cost is as a percentage of selling price for each of the three product lines for 2007. 2. Calculate the contribution margin ratio for each product for 2007. 3. Calculate the 2007 weighted contribution margin for the Charlotte plant. 4. Calculate breakeven in dollars for 2007. Hint: You will need the information from previous requirements. Additional Information: The home office rejected your proposed budget. This is based on their belief that the loan would not be granted based on your budget (in the past the Bank would not make loans unless a profit was earned by the Company of at least $.5M. The Plant Manager offers an alternate plan. He wants to increase the advertising budget to $3.6 million. This he thinks will cause an increase in sales to $19 million for envelopes, $13 million for cups and $8 million for packaging (for total sales of $40M). 5. Given the comments above, prepare a new budgeted income statement based on the Plant Manager?s suggestions 6. Do you see any issues with the sales manager?s proposal? 7. What other ways could you allocate fixed manufacturing costs? 8. Sue sends you an email asking for a meeting tomorrow. In this meeting she wants you to discuss the issues that the Charlotte facility is facing, either financial and/or non-financial. This memo should be organized and well written,I am willing to pay more as long I get good answers from this case,1 trought 8 are difficult for me, I am willing to pay more for good answers to those questions
Question 3
10. Which of the following statements best describes the relationship of U.S. GAAP and IFRS? (Points : 2) They are identical They are entirely different conceptual frameworks They are similar but not identical Neither has anything to do with accounting They both relate only to publicly traded companies 11. Generally Accepted Accounting Principles: (Points : 2) Focus on the review of a situation Does not require financial statements Never change Intend to make information on the financial statements relevant, reliable and comparable Oversees Security and Exchange Commission 12. Apatha Company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. The effects of this transaction include: (Points : 2) Assets increase by $75,000 and expenses increase by $75,000 Assets increase by $75,000 and expenses decrease by $75,000 Liabilities increase by $75,000 and expenses decrease by $75,000 Assets decrease by $75,000 and expenses decrease by $75,000 Assets increase by $75,000 and liabilities increase by $75,000 13. Fast-Forward had cash inflows from operations of $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was: (Points : 2) $40,500 increase $40,500 decrease $134,500 decrease $134,000 increase 14. A company has twice as much owner's equity as it does liabilities. If total liabilities are $50,000, what amounts of assets are owned by the company? (Points : 2) $50,000 $100,000 $150,000 $200,000 15. Which of the following elements are found on the Balance Sheet? (Points : 2) Service Revenue Net Income Operating Activities Utilities Expense Retained Earnings 16. Ethical behavior requires: (Points : 2) That an auditors' pay not depend on the figures in the client's reports Auditors to invest in businesses they audit Analysts to report information favorable to their companies Managers to use accounting information to benefit themselves That an auditor provides a favorable opinion 17. If Beginning Retained Earnings was $184,300, the company distributed $46,000 in dividends and Ending Retained Earnings was $345,000, what was the net income for the period? (Points : 2) $154,700 $206,700 $114,700 $575,300 $160,700 18. An example of an operating activity is: (Points : 2) Paying wages Purchasing office equipment Borrowing money from a bank Selling stock Paying off a loan 19. An asset created by prepayment of an expense is: (Points : 2) Recorded as a debit to an unearned revenue account Recorded as a debit to a prepaid expense account Recorded as a credit to an unearned revenue account Recorded as a credit to a prepaid expense account Not recorded in the accounting records until the earnings process is complete 20. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2) Business entity assumption Monetary unit assumption Value assumption Cost assumption Time period assumption
Question 4
(9-10) The earning dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby?s common stock sells for $23 per share, its last dividend was $2.00 and the company will pay a dividend of $2.14 at the end of the current year. A Using the discounted cash flow approach, what is its cost of equity? B If the firm?s beta 1.6, the risk-free rate 9%, and the expected return on the market is 13%, then what would be the firm?s cost of equity based on the CAPM approach? C If the firm?s bonds a return of 12%, then what would be your estimate of r, using the over-own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the midpoint of the risk premium range.) D On the basis of the results of the parts a through c, what would your estimate of Shelby?s cost of equity? (10-1) A project has an initial cost of 52,125, expected net cash inflows of 12, 000 per year for 8 years and a cost of capital of 12%%. What is the project?s NPV? (Hint begin by constructing a time line.) (10-2) Refer to Problem 10-1. What is the project?s IRR? (10-3) Refer to Problem 10-1. What is the project MIRR? (10-4) Refer to Problem 10-1. What is the project PI? (10-5) Refer to Problem 10-1. What is the project?s paycheck period? (10-6) Refer to Problem 10-1. What is the project?s discounted paycheck period? (10-7) Your division is considering two investment projects, each of which requires an up-front expenditure of 15 million. You estimate that the investments will produce the following net cash flows. Year Project A Project B 1 $5,000,000 $20,000.000 2 10,000,000 10,000.000 3 20,000.000 6,000,000 A What are the two projects net present values, assuming the cost of capital is %5? B What are the two projects? IRRs at these same costs of capital?
Question 5
"Acquiring Corporation (A) has 50,000 shares of common stock outstanding (value -- $10 per share) and $500,000 of accumulated earnings and profits. Target Corporation (T) has assets with an aggregate adjusted basis of $300,000 and an aggregate FMV of $500,000 and $100,000 of accumulated earnings and profits. Except as otherwise noted, T has no liabilities. T?s ten equal shareholders each own 100 shares of T voting common stock with and adjusted basis of $20,000 and a FMV of $50,000. Discuss the tax consequences to A, T and T?s shareholders of each of the following alternative transactions: a. T merges into A in a qualified Type A Reorganization. Each T shareholder receives 4,000 shares of A voting common stock (value -- $40,000) and A nonvoting preferred stock (not ?unqualified preferred stock?) worth $10,000. b. Same as (a), above, but instead of the preferred stock each T shareholder receives 20-year market rate interest bearing A notes with a principal amount and fair market value of $10,000. c. Same as (b), above, except that two of the shareholders receive all the notes (with a principal amount and FMV of $100,000), and the remaining eight shareholders each receives voting common stock worth $50,000. d. Same as (b), above, except that T had $50,000 of accumulated earnings and profits. e. Assume that T has assets with an aggregate FMV of $600,000, an aggregate adjusted basis of $300,000, and a $100,000 liability. A acquires all of T assets in a qualified Type C reorganization in exchange for A voting stock worth $500,000 and A?s assumption of T?s $100,000 liability. T immediately distributes the A stock to its shareholders in complete liquidation. f. Same as (e), above, except that A transfers $500,000 of A voting stock and $100,000 cash to T, which uses the cash to pay off its liability and then distributes the stock to its shareholders in complete liquidation."
