Question 1
Can you please help me with this? Below is the information and in addition, I have uploaded my business plan. Your task is to take a look at each of the operational areas of your current or intended business, and determine what financial information you will have to acquire in order to make adequate planning decisions. The financial information will be collected through ratio analysis. Some businesses have intensive ratio analysis and others will have limited ratio analysis. Use the ratios that apply to your selected business. If you are presenting on an existing business, you will have most of the ratios listed in your textbook. If you are working on a new business venture, your ratio analysis may be limited to only the Income statement. In either case, common size financial statements should be presented. Calculate the applicable ratios for each year and provide substantial explanation of any trends from prior years, industry competitors, or other similar benchmarks. Use trend analysis or compare your projections to available industry benchmarks that you find on the Internet. Your project plan may be better suited to a capital budgeting type of analysis that includes a detailed NPV calculation. How you choose you analyze your company is up to you; however, you must incorporate substantial analysis and textual comment in this assignment. The goal is to analyze the projections you provided in accounting for the benefit of an analyst that might review your package at the bank, or investor review process. Complete your report with a detailed analysis of the financial risks as you see them. Finish your financial management section by identifying the risks that are apparent with your financial projections. Helpful questions for getting started ?How critical is cash flow to the business you are profiling? ?Should you expand your current or potential business at this time? How about in the medium term or long term? ?You may decide to pursue expanding your business, but how do you determine whether your cash flow and assets are sufficiently robust to bankroll it? ?If you decide to pursue outside investment or financing, what financial data will you need to provide to venture capitalists or investors? ?What are the ratios you need to calculate for your existing or new enterprise? Where can you obtain the financial data that will form the basis for your calculations? What benchmarks will you use and how will your detail the differences? ?Taken together with your P&L statement (or other financial reports) from Accounting for Business Management, how does your financial analysis stand up to scrutiny? Thank you in advance,Ok thank you
Question 2
Hi Please fin attache the case and the directions below: This is a case about interest rate forecasting. On the first page it mentions Wally, who when facing falling sales, sees a memo from his boss. She is concerned (see next page) about the declining operating margin from 14 percent to 10 percent. She has asked Wally for yield curve data showing the stability of interest rates over the past few years, the stability of current prices, and inflation rates. She also wishes to evaluate whether Babes should issue debt. Towards the bottom of the page she states, I think we can currently issue 3-year bonds priced to yield 6.4 percent, 5-year bonds priced to yield 7.3 percent, and 10-year bonds priced to yield 8.4 percent. See the next page, 792. We are just reading through the case at this point. This is the information you need to forecast interest rates. See Table 1. Treasury securities are issued by the government, they are called Treasury securities. There are 3 periods of information for August 1991, August 1992, November 1992. They have varying maturities, meaning they come due in 3 months, 6 months, etc. You notice that yields (returns) rise with maturity, which is what you would expect. If you were tying your money in an investment for a long period of time, your yield would be higher than it would be for a short period of time. Table 2 includes information about corporate bonds, see the section on Default risk premia. Corporate bonds may default, if debt is issued by a firm, the firm may not pay the debt, the risk of nonpayment is a percentage that is added to the return. Riskier bonds like C-rated bonds have higher risk of default, or higher default risk than AAA bonds. Using the data provided in Table 1, construct the yield curves for August 1991, August 1992, and November 1992. Yes, T-bills are risk-free. The yield curve is a graph of interest rates and time to maturity. Draw a graph in Excel. Create a table of values first. In the first column, list the maturities from Table 1. Second column: list the yields for August 1992 Third column: list the yields for November 1992. Insert Line Chart. Highlight maturities 1 - 10 and the second and third columns to get the graph. 2. is descriptive. Evaluate the change in shape of the yield curve using expectations and market segmentation. Look them up in the book and write a paragraph. We use 1-10 just because of ease of comparability, which does not exist for 30 years. We'll do 1-10, as 3 months and 6 months are of a different duration than the annual maturities for years 1 - 10. 3. Calculate the one-year forward rates of interest implied by the November 1992 yield curve over the period 1993-2002. We need a starting point. Use 1993 as 3.8% 4.65 = 2 year rate = (3.8+x)/2. According to the expectations theory, the 2 year rate = sum of the previous year's rate and the year before that, or the 2 previous 1 year rates. x = 5.5 % That is your answer for 1994. Next, for 1995, you have a 3-year rate = 5.23 = (3.8+5.5+x)/3 x = 6.39 % Complete the rest by yourselves. 4. Using these 1 year forward rates, calculate the expected annual inflation rate in each of the next 10 years, and use this rate to obtain the average rate of price appreciation over the 1993 to 2002 period. Assume expectations, knominal = kreal + expected inflation premium expected inflation premium = knominal - kreal = 1993-1994 = 5.5-3.8 = 1.7% 5.5 was the first answer we computed, that is the nominal quoted interest rate. The real rate, according to expectations, is the nominal rate for the year before, or 3.8% For 1994-1995, 6.39 -5.5 = 0.89% is the expected inflation premium. knominal = 6.39 - kreal of 5.5 Complete the rest. 5. Examine the information provided in Table 2. Do these data lead you to believe that the annual inflation rate you calculated in Q 4 might be incorrect ? Why or why not ? See Table 2, the second and third columns list maturity and liquidity risk premia which were omitted from the strict expectations theory computation. 6. Using the data provided in Tables 1 and 2 prepare a revised estimate of (a) the one-year forward interest rates implied by the November 1992 yield curve over the 1993-2002 period, and the expected inflation rate in each of these years. Originally, we were using the expectations theory, now we are using liquidity preference. 1993, one year forward rate = 3.8% 1994, 4.65 + 0.2 + 0, take the figure for 2 years from the last column of Table 1, add the maturity risk premium and the liquidity risk premium 3 years, 1995, 5.23 + .3 + .1 = 5.63%. This is 6a. 6b. Find the inflation rates as the difference between the nominal rates (answers) to 6a. We are using the liquidity preference theory, so inflation = sum of maturity and liquidity risk premia 1 year = 0% 2 years = .2 + 0 = .2 3 years, .3 + .1 = .4 7. How would the yield curve for an AAA rated firm, a B-rated firm, and a C-rated firm, differ from the Treasury security yield curve you constructed in # 1 ? You have to draw yield curves - 3 lines for the 3 types of bonds using the same procedure as problem 1. Year 1, nominal rate = T-bill rate + Maturity risk premium + liquidity risk premium + default risk premium for an AAA bond 3.8 + 0 +0 +.9 = 4.7 3 years, 5.23 + .3 + .1 + .9 We are taking the lowest risk free rate on a Treasury security and adjusting it to the rate on an AAA bond. Do the rest of the AAA bonds, then all of the B rated bonds-just use a different column for default risk, and then the C-rated bonds. Also, compare the shape of the yield curve in question 7, and compare the 2 methods used. 9. Can you use the information in the case to estimate Babes-N-Toyland's bond rating ? See the yields on the second page. 3 year bonds priced to yield 6.4% per annum. 5-year bonds priced to yield 7.3 percent per annum, 10 year bonds priced to yield 8.4 percent. Look at the yields on the AAA. B, and C bonds and see if any bond has a maturity and yield similar to these figures. That will be Babes's bond rating. 10. Think through this one. It uses a result from 5080. AAA are the least risky and C the most risky.,Please answer the 10 questions on the homework and please let me know once it is finished. The earlier the better. Thanks, John M. Barreto This is a case about interest rate forecasting. On the first page it mentions Wally, who when facing falling sales, sees a memo from his boss. She is concerned (see next page) about the declining operating margin from 14 percent to 10 percent. She has asked Wally for yield curve data showing the stability of interest rates over the past few years, the stability of current prices, and inflation rates. She also wishes to evaluate whether Babes should issue debt. Towards the bottom of the page she states, I think we can currently issue 3-year bonds priced to yield 6.4 percent, 5-year bonds priced to yield 7.3 percent, and 10-year bonds priced to yield 8.4 percent. See the next page, 792. We are just reading through the case at this point. This is the information you need to forecast interest rates. See Table 1. Treasury securities are issued by the government, they are called Treasury securities. There are 3 periods of information for August 1991, August 1992, November 1992. They have varying maturities, meaning they come due in 3 months, 6 months, etc. You notice that yields (returns) rise with maturity, which is what you would expect. If you were tying your money in an investment for a long period of time, your yield would be higher than it would be for a short period of time. Table 2 includes information about corporate bonds, see the section on Default risk premia. Corporate bonds may default, if debt is issued by a firm, the firm may not pay the debt, the risk of nonpayment is a percentage that is added to the return. Riskier bonds like C-rated bonds have higher risk of default, or higher default risk than AAA bonds. Using the data provided in Table 1, construct the yield curves for August 1991, August 1992, and November 1992. Yes, T-bills are risk-free. The yield curve is a graph of interest rates and time to maturity. Draw a graph in Excel. Create a table of values first. In the first column, list the maturities from Table 1. Second column: list the yields for August 1992 Third column: list the yields for November 1992. Insert Line Chart. Highlight maturities 1 - 10 and the second and third columns to get the graph. 2. is descriptive. Evaluate the change in shape of the yield curve using expectations and market segmentation. Look them up in the book and write a paragraph. We use 1-10 just because of ease of comparability, which does not exist for 30 years. We'll do 1-10, as 3 months and 6 months are of a different duration than the annual maturities for years 1 - 10. 3. Calculate the one-year forward rates of interest implied by the November 1992 yield curve over the period 1993-2002. We need a starting point. Use 1993 as 3.8% 4.65 = 2 year rate = (3.8+x)/2. According to the expectations theory, the 2 year rate = sum of the previous year's rate and the year before that, or the 2 previous 1 year rates. x = 5.5 % That is your answer for 1994. Next, for 1995, you have a 3-year rate = 5.23 = (3.8+5.5+x)/3 x = 6.39 % Complete the rest by yourselves. 4. Using these 1 year forward rates, calculate the expected annual inflation rate in each of the next 10 years, and use this rate to obtain the average rate of price appreciation over the 1993 to 2002 period. Assume expectations, knominal = kreal + expected inflation premium expected inflation premium = knominal - kreal = 1993-1994 = 5.5-3.8 = 1.7% 5.5 was the first answer we computed, that is the nominal quoted interest rate. The real rate, according to expectations, is the nominal rate for the year before, or 3.8% For 1994-1995, 6.39 -5.5 = 0.89% is the expected inflation premium. knominal = 6.39 - kreal of 5.5 Complete the rest. 5. Examine the information provided in Table 2. Do these data lead you to believe that the annual inflation rate you calculated in Q 4 might be incorrect ? Why or why not ? See Table 2, the second and third columns list maturity and liquidity risk premia which were omitted from the strict expectations theory computation. 6. Using the data provided in Tables 1 and 2 prepare a revised estimate of (a) the one-year forward interest rates implied by the November 1992 yield curve over the 1993-2002 period, and the expected inflation rate in each of these years. Originally, we were using the expectations theory, now we are using liquidity preference. 1993, one year forward rate = 3.8% 1994, 4.65 + 0.2 + 0, take the figure for 2 years from the last column of Table 1, add the maturity risk premium and the liquidity risk premium 3 years, 1995, 5.23 + .3 + .1 = 5.63%. This is 6a. 6b. Find the inflation rates as the difference between the nominal rates (answers) to 6a. We are using the liquidity preference theory, so inflation = sum of maturity and liquidity risk premia 1 year = 0% 2 years = .2 + 0 = .2 3 years, .3 + .1 = .4 7. How would the yield curve for an AAA rated firm, a B-rated firm, and a C-rated firm, differ from the Treasury security yield curve you constructed in # 1 ? You have to draw yield curves - 3 lines for the 3 types of bonds using the same procedure as problem 1. Year 1, nominal rate = T-bill rate + Maturity risk premium + liquidity risk premium + default risk premium for an AAA bond 3.8 + 0 +0 +.9 = 4.7 3 years, 5.23 + .3 + .1 + .9 We are taking the lowest risk free rate on a Treasury security and adjusting it to the rate on an AAA bond. Do the rest of the AAA bonds, then all of the B rated bonds-just use a different column for default risk, and then the C-rated bonds. Also, compare the shape of the yield curve in question 7, and compare the 2 methods used. 9. Can you use the information in the case to estimate Babes-N-Toyland's bond rating ? See the yields on the second page. 3 year bonds priced to yield 6.4% per annum. 5-year bonds priced to yield 7.3 percent per annum, 10 year bonds priced to yield 8.4 percent. Look at the yields on the AAA. B, and C bonds and see if any bond has a maturity and yield similar to these figures. That will be Babes's bond rating. 10. Think through this one. It uses a result from 5080. AAA are the least risky and C the most risky.
Question 3
10 multiple choice questions (Notes) For quiz three, there are a couple of problems, (number 4 and 5 on the quiz), that require quite a bit of math. Many of these problems have you using simple multiplication. For problems number 8 and 9 on your quiz, use the labor or materials price variance formulas. For problem number 10 on your quiz, to get net income, take the revenue shown minus all of the expenses shown. To get the final Retained Earnings, just add the net income you calculated to the current retained earnings balance ($3720). This will all make a little more sense after you read the chapters. ***Question 1*** Gerstenberger, Inc., operates a child day care center in a major metropolitan area. It offers three child care services: full day, half-day, and after-school care. Gerstenberger charges $200 per week for full day care, $100 per week for half-daycare, and $75 per week for after-school care per child. Projected enrollments for the next week follow. Use this information to estimate the revenue per week for Gerstenberger. Week____Full Day care___Half-day care___After-school care 1-----------------30--------------------25--------------------20 2-----------------30--------------------30--------------------25 3-----------------30--------------------26--------------------31 4-----------------30--------------------30--------------------30 5-----------------35--------------------25--------------------27 6-----------------35--------------------27--------------------28 A) $10,875 B) $10,000 C) $11,000 D) $12,000 ***Question 2*** Amadio, Inc., has a beginning accounts receivable balance of $20,000. It expects the following sales for the first quarter: January $140,000 February 150,000 March 160,000 Based on past experience, Amadio believes that 60 percent of sales will be collected in the month of sale receiving a 2% discount. The remaining sales will be collected in the month after that sale. What are the estimated cash receipts for January through March. A) $102,320 B) $142,800 C) $75,660 D) $74,680 ***Question 3*** Neidringhaus Corporation?s sales revenue follows: ---------------November (Actual sales)___December(Projected sales)____January(Projected sales) Cash sales------------$80,000------------------------$100,000-----------------------------$60,000 Credit sales----------340,000-------------------------460,000------------------------------280,000 Neidringhaus?s management estimates that 2% of credit sales are uncollectible, that 55 percent of credit sales will be collected in the month of sale, and that 43 percent will be collected following sale. What are the expected cash collections for December and January? A) $499,200 B) $411,800 C) $502,600 D) $506,000 ***Questions 4 and 5*** Required: Prepare the production budget, by month, for the first three months. Frausto, Inc., plans to produce 22,000; 24,000; 26,000; 28,000; 30,000; and 32,000 units for the first six months, respectively, of the coming year. Each unit requires 2 liters of direct materials that cost $3 per liter. Frausto indicates that the beginning inventory of direct materials is 5,000 liters, but Frausto wants to reduce inventory by 5 percent of what is needed for the next month?s production. Frausto pays for 70 percent of its purchases in the month of purchase, taking a 3 percent discount. The remaining purchases are paid in the month following purchase. Frausto indicates that the beginning accounts payable balance is $24,000. 4. Prepare Frausto?s direct materials purchases budget by month for the first quarter. (month one) Direct Material Purchases in month one: A) $135,100 B) $124,200 C) $190,000 D) $150,000 5. Prepare Frausto?s cash disbursements schedule by month in the first quarter. (month one) Total Cash Disbursements in month one. A) $108,332 B) $106,800 C) 135,443 D) $149,711 ***Question 6*** Prepare the adjusting entry for the month ended October 31 and indicate the effect the adjustment would have on net income: Davis, Inc., a real estate company, rents office space to a lawyer for $1,200 per month. The invoice for October has not been sent as of October 31. A) Accounts Payable $1,200, Rental fees earned $1,200 B) Accounts receivable $1,200, Rental fees earned $1,200 ***Question 7*** Winters, Inc., is a manufacturing firm that makes table tennis paddles. Each paddle consists of a handle, a wooden paddle, and a rubber backing for each side of the wooden paddle. As the paddles progress through the assembly process, workers attach the handles and glue the rubber backing into place. Classify the following costs as one of the four options by placing the number of the correct answer in the space provided. 1. Direct materials cost 2. Direct labor cost 3. Manufacturing overhead cost 4. Selling and administrative cost ___ A. Cost of handles for paddles ___ B. Wages of assembly workers ___ C. Rent on production facilities ___ D. Wages of sales personnel A) a)3, b)4, c)4, d)2 B) a)1, b)4, c)3, d)2or1 C) a)1, b)2, c)3, d)3or4 ***Question 8*** Based on the standard set by Tish Company, 5,500 direct labor hours should have been used in production this period at a cost of $20 per hour. The actual results indicate that 5,400 hours were used at a total cost of $113,400. What are the direct labor price and direct labor usage variances? A) $5,600 F & $2,100 U B) $5,300 F & $2,000 U C) $5,400 U & $2,000 F D) $5,200 F & $2,200 U ***Question 9*** Jorrey Company manufactures bookcases. Direct materials standards are 10 board feet of lumber per bookcase at a cost of $2.50 per board foot. During the month of July, Jorrey purchased 25,000 board feet of lumber at a cost of $60,000. Production during July used 21,000 board feet of lumber to manufacture 1,950 bookcases. What are the direct materials price, usage, and inventory variances? A) $2,500 F; $3,750 U; $10,000 U B) $4,800 U; $1,200 F; $1,000 F C) $4,800 U; $1,200 F; $1,200 U (Question 10 may be easier read on the attached word document) ***Question 10*** The adjusted trial balance of Murphy?s Taxi Service, Inc., follows. Determine the net income of loss for the month of May and the balance in the Retained Earnings account that would appear on the balance sheet. ______________________________________________________________________________ Murphy?s Taxi Service, Inc. Adjust trial balance May 31, 2008 _______________________________________________________________________________ Debits Credits Cash $1,920 Prepaid Insurance 690 Automobiles 29,500 Accumulated depreciation- automobiles $12,800 Capital stock 15,000 Retained earnings 3,720 Passenger fee revenue 4,250 Salary expense 2,400 Fuel expense 485 Depreciation expense 615 Repairs and maintenance expense __ 160 __ _______ TOTAL $35,770 $35,770 ====== ======= (net income and retained earnings) A) $590 & $3,310 B) $690 & $3,210 C) $590 & $4,310 D) $610 & $4,210,Thanks Michael. There is a Word document attached for some of the problems that may not be legible on this site.,If it didn't attach the first time here it is again. Thanks
Question 4
1.Which of the following statements is CORRECT? a. Put options give investors the right to buy a stock at a certain strike price before a specified date. b. Call options give investors the right to sell a stock at a certain strike price before a specified date. c. Options typically sell for less than their exercise value. d. LEAPS are very short-term options that were created relatively recently and now trade in the market. e. An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend. 2. Which of the following statements is CORRECT? a. If the underlying stock does not pay a dividend, it makes good economic sense to exercise a call option as soon as the stock?s price exceeds the strike price by about 10%, because this permits the option holder to lock in an immediate profit. b. Call options generally sell at a price less than their exercise value. c. If a stock becomes riskier (more volatile), call options on the stock are likely to decline in value. d. Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike price, the lower the premium on the option is likely to be. e. Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock. 3. Which of the following statements is CORRECT? a. An option's value is determined by its exercise value, which is the market price of the stock less its striking price. Thus, an option can't sell for more than its exercise value. b. As the stock?s price rises, the time value portion of an option on a stock increases because the difference between the price of the stock and the fixed strike price increases. c. Issuing options provides companies with a low cost method of raising capital. d. The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price. e. The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.,I think #1 e is correct and # 2 d is correct , but# 3 I am not sure. Could you clarification those question for me and explain why those answer is correct. Thanks
Question 5
Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/04, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return? Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has an FMV of $45,000, an adjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that the business LLC will assume. What is Brett's outside tax basis in his LLC interest? Sue and Andrew form SA general partnership. Each person receives an equal interest in the newly created partnership. Sue contributes $10,000 of cash and land with a FMV of $55,000. Her basis in the land is $20,000. Andrew contributes equipment with a FMV of $12,000 and a building with a FMV of $33,000. His basis in the equipment is $8,000, and his basis in the building is $20,000. How much gain must the SA general partnership recognize on the transfer of these assets from Sue and Andrew?
