Question 1
I need help on these 3 questions 6. Review current studies and literature and tell me what percent increases/decreases we can expect commercial rates, medicare rates, and medicaid rates to be over the next three years. What impact will those rate increases/decreases have on our operations? 7. Analyze my capitates managed care agreement with the city. Using differential cost analysis for 2006 data, tell me the full cost profit/loss and the differential cost profit/loss. Should we renew the contract for next year at present rates, or should we ask for a rate increase, and, if so, how much of a rate increase do we need to cover our full cost? To cover our differential cost? 8. Our radiology department is in violation of the anti-trust statutes by developing a fee schedule using RVUs developed by the radiologist?s professional society. You must establish a new RVU system before we can set FY 2007 rates. The radiology manager has already completed some of the work and I?ll send it over to you (see Table V). Please develop a hospital-specific RVU schedule and, using activity-based costing, assign FY 2007 radiology department rates (total radiology expenses for FY 2006 were $4.5 million). Note: use technician minutes and supply expense to assign direct costs and machine minutes to assign indirect costs.) Please see attachment.
Question 2
1. FAB Corporation will need 200,000 Canadian dollars (C$) in 90 days to cover a payable position. Currently, a 90-day call option with an exercise price of $.75 and a premium of $.01 is available. Also, a 90-day put option with an exercise price of $.73 and a premium of $.01 is available. FAB plans to purchase options to hedge its payable position. Assuming that the spot rate in 90 days is $.71, what is the net amount paid, assuming FAB wishes to minimize its cost? a. $144,000. b. $148,000. c. $152,000. d. $150,000. 2. A call option exists on British pounds with an exercise price of $1.60, a 90-day expiration date, and a premium of $.03 per unit. A put option exists on British pounds with an exercise price of $1.60, a 90-day expiration date, and a premium of $.02 per unit. You plan to purchase options to cover your future receivables of 700,000 pounds in 90 days. You will exercise the option in 90 days (if at all). You expect the spot rate of the pound to be $1.57 in 90 days. Determine the amount of dollars to be received, after deducting payment for the option premium. a. $1,169,000. b. $1,099,000. c. $1,106,000. d. $1,143,100. e. $1,134,000. 3. Which of the following is a reason to consider international business? a. economies of scale. b. exploit monopolistic advantages. c. diversification. d. all of the above 4. Assume the following information: U.S. deposit rate for 1 year = 11% U.S. borrowing rate for 1 year = 12% Swiss deposit rate for 1 year = 8% Swiss borrowing rate for 1 year = 10% Swiss forward rate for 1 year = $.40 Swiss franc spot rate = $.39 Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF600,000 in 1 year. Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a forward hedge? a. $234,000. b. $238,584. c. $240,000. d. $236,127. 5. Assume a U.S.-based subsidiary wants to raise $1,000,000 by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is $.02. Thus, the MNC needs ____ rupees to obtain the $1,000,000 needed. a. 50,000,000 b. 20,000 c. 1,000,000 d. none of the above 6. Which of the following is not an advantage of international acquisitions over the establishment of a new subsidiary? a. The firm can immediately expand its international business. b. An international acquisition typically generates quicker cash flows than the establishment of a new subsidiary. c. International acquisitions are generally cheaper than the establishment of a new subsidiary. d. An international acquisition typically generates larger cash flows than the establishment of a new subsidiary. e. All of the above are advantages of international acquisitions. 7. Which of the following would probably not cause the stock price of a foreign target to decrease? a. Its expected cash flows decline. b. General stock market conditions in the foreign country are deteriorating. c. Investors anticipate that the target will be acquired. d. All of the above will cause the target's stock price to decrease. 8. Klimewsky, Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Klimewsky would like you to value this target and has provided you with the following information: ? Klimewsky expects to keep the target for three years, at which time it expects to sell the firm for 500 million Malaysian ringgit (MYR) after deducting the amount for any taxes paid. ? Klimewsky expects a strong Malaysian economy. Consequently, the estimates for revenues for the next year are MYR300 million. Revenues are expected to increase by 9% over the following two years. ? Cost of goods sold are expected to be 60% of revenues. ? Selling and administrative expenses are expected to be MYR40 million in each of the next three years. ? The Malaysian tax rate on the target's earnings is expected to be 30%. ? Depreciation expenses are expected to be MYR15 million per year for each of the next three years. ? The target will need MYR9 million in cash each year to support existing operations. ? The target's current stock price is MYR35 per share. The target has 11 million shares outstanding. ? Any cash flows remaining after taxes are remitted by the target to Klimewsky, Inc. Klimewsky uses the prevailing exchange rate of the Malaysian ringgit as the expected exchange rate for the next three years. This exchange rate is currently $.23. ? Klimewsky's required rate of return on similar projects is 13%. Based on the information provided above, the net present value of the Malaysian target is $____ million. a. 155.9 b. 111.5 c. 138.0 d. 143.0 e. none of the above Hint Year 1 Year 2 Year 3 Revenue MYR300 MYR327 MYR356.4 Cost of Goods Sold MYR180 MYR196.2 MYR213.8 Gross Profit MYR120 MYR130.8 MYR142.6 Selling & Admin. Exp. Depreciation Earnings Before Taxes Tax (30%) Earnings After Taxes +Depreciation ?Funds to Reinvest Sale of Firm Cash Flows in MYR Exchange Rate of MYR Cash Flows in $ PV (13% disc. rate) Cumulative PV 9. Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5,000,000. If the project is undertaken, Baps would terminate the project after four years. Baps' cost of capital is 13%, and the project is of the same risk as Baps' existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 Year 2 Year 3 Year 4 NOK10,000,000 NOK15,000,000 NOK17,000,000 NOK20,000,000 The current exchange rate of the Norwegian kroner is $.135. Baps' exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below: Year 1 Year 2 Year 3 Year 4 $.13 $.14 $.12 $.15 What is the net present value of the Norwegian project? a. ?$803,848. b. $5,803,848. c. $1,048,829. d. none of the above 10. When an MNC is considering financing a portion of a foreign project within the foreign country, the best method to account for a foreign project's risk is to: a. derive net present values based on the WACC. b. adjust the weighted average cost of capital for the risk differential. c. derive the net present value of the equity investment. d. none of the above 11. Assume a U.S.-based subsidiary wants to raise $1,000,000 by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is $.02. Thus, the MNC needs ____ rupees to obtain the $1,000,000 needed. a. 50,000,000 b. 20,000 c. 1,000,000 d. none of the above 12. To hedge a ____ in a foreign currency, a firm may ____ a currency futures contract for that currency. a. receivable; purchase b. payable; sell c. payable; purchase d. none of the above 13. Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar. Which of the following is true? a. Japanese exporters can increase American sales by shifting operations from their British subsidiaries to Japan. b. British exporters can increase American sales by shifting operations from their Japanese subsidiaries to Britain. c. American exporters can increase sales to Japan by shifting operations from Japanese subsidiaries to American subsidiaries. d. B and C 14. Even if production costs are higher in a foreign country, a U.S. firm may establish a manufacturing plant in the foreign country now if: a. the host government of that country eliminates all quotas. b. the host government of that country reduces all quotas. c. the host government of that country increases all quotas. d. the host government of that country eliminates all tariffs. 15. Blake Inc. needs ?1,000,000 in 30 days. It can earn 5 percent annualized on a German security. The current spot rate for the euro is $1.00. Blake can borrow funds in the U.S. at an annualized interest rate of 6 percent. If Blake uses a money market hedge to hedge the payable, what is the cost of implementing the hedge? a. $1,000,000. b. $1,055,602. c. $1,000,830. d. $1,045,644. 16. Samson Inc. needs ?1,000,000 in 30 days. Samson can earn 5 percent annualized on a German security. The current spot rate for the euro is $1.00. Samson can borrow funds in the U.S. at an annualized interest rate of 6 percent. If Samson uses a money market hedge, how much should it borrow in the U.S.? a. $952,381. b. $995,851. c. $943,396. d. $995,025. 17. Which of the following is not directly considered in the decision by a U.S.-based MNC to divest a subsidiary? a. the required rate of return on the subsidiary. b. forecasted exchange rates of the subsidiary's currency relative to the dollar. c. the initial outlay on the project. d. the possible selling price of the project. 18. Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on Canadian loans is C$4 million. Given these exact figures above, the dollar value of Whitewater's "earnings before interest and taxes" would ____ if the Canadian dollar appreciates; the dollar value of Whitewater's cash flows would ____ if the Canadian dollar appreciates. a. increase; increase b. decrease; increase c. decrease; decrease d. increase; decrease e. increase; be unaffected 19. An MNC that plans to acquire a target would prefer to make a bid at a time when the local stock market prices are generally ____. Assume that economic conditions are held constant when completing this statement. a. low b. high c. volatile d. none of the above 20. Linden Co. has 1,000,000 euros as payables due in 90 days, and is certain that euro is going to depreciate substantially over time. Assuming the firm is correct, the ideal strategy is to: a. sell euros forward b. purchase euro currency put options. c. purchase euro currency call options. d. purchase euros forward. e. remain unhedged 21. Direct foreign investment would typically be welcomed if: a. the products to be produced are substitutes for other locally produced products. b. people from the country of the company's headquarter are transferred to the foreign country to work at the subsidiary. c. the products to be produced are going to be exported. d. all of the above 22. The best means to accomplish the revenue-related motive of attracting new sources of demand is to: a. acquire a competitor that has controlled its local market. b. establish a subsidiary or acquire a competitor in a new market. c. establish a subsidiary in a market where tougher trade restrictions will adversely affect the firm's export volume. d. establish subsidiaries in markets whose business cycles differ from those where existing subsidiaries are based. 23. Springfield Co., based in the U.S., has a cost from orders of foreign material that exceeds its foreign revenue. All foreign transactions are denominated in the foreign currency of concern. This firm would ____ a stronger dollar and would ____ a weaker dollar. a. benefit from; be unaffected by b. benefit from; be adversely affected by c. be unaffected by; be adversely affected by d. be unaffected by; benefit from e. benefit from; benefit from 24. If revenues and costs are equally sensitive to exchange rate movements, MNCs may reduce their economic exposure by restructuring their operations to shift the sources of costs or revenues to other locations so that: a. cash inflows exceed cash outflows in each foreign currency. b. cash outflows exceed cash inflows in each foreign currency. c. cash inflows match cash outflows in each foreign currency. d. none of the above 25. Mercury Co. has a subsidiary based in Italy and is exposed to translation exposure. Mercury forecasts that its earnings next year will be ?10 million. Mercury decides to hedge the expected earnings by selling ?10 million forward. During the next year, the euro appreciated. Mercury's consolidated earnings were ____ affected by the euro's movement, and Mercury's hedge position was ____ affected by the euro's movement. a. favorably; favorably b. favorably; adversely c. adversely; favorably d. adversely; adversely 26. According to information in the text, a host government would be least likely to provide incentives for direct foreign investment (DFI) into its country if the firm planning DFI: a. would compete with local firms of the host country. b. would produce a good not currently available in the host country. c. would produce a good and export it to other countries. d. B and C 27. Assume a U.S.-based MNC has a Chilean subsidiary that annually remits 30 million Chilean pesos to the U.S. If the peso ____, the dollar amount of remitted funds ____. a. appreciates; decreases b. depreciates; is unaffected c. appreciates; is unaffected d. depreciates; decreases e. B and C 28. An international project's NPV is ____ related to the size of the initial investment and ____ related to the project's required rate of return. a. positively; positively b. positively; negatively c. negatively; positively d. negatively; negatively 29. From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms: a. is the top point. b. is the point closest to the vertical axis. c. is the point half way between the two end points. d. cannot be determined since firms vary in their willingness to accept risk. 30. Assume the following information: U.S. deposit rate for 1 year = 11% U.S. borrowing rate for 1 year = 12% New Zealand deposit rate for 1 year = 8% New Zealand borrowing rate for 1 year = 10% New Zealand dollar forward rate for 1 year = $.40 New Zealand dollar spot rate = $.39 Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 1 year. You are a consultant for this firm. Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a money market hedge? a. $238,584. b. $240,000. c. $234,000. d. $236,127. Hint: Steps are: Borrow, Convert, Invest 31. When a foreign currency is perceived by a firm to be __________, the firm will probably __________ direct foreign investment in that country. a. undervalued; consider b. undervalued; not consider c. overvalued; not consider d. A and C e. B and C 32. The cost of capital can vary among countries because: a. MNCs based in some countries do not have a competitive advantage over others. b. MNCs may be able to adjust their international operations and sources of funds to capitalize on differences in the cost of capital among countries. c. of country differences in tax laws or monetary supply. d. none of the above. 33. A U.S. firm has a Canadian subsidiary that remits some of its earnings to the parent on an annual basis. The firm has no other foreign business. The firm could best reduce its exposure to exchange rate risk by issuing bonds denominated in: a. U.S. dollars. b. Canadian dollars. c. multiple currencies. d. euros. 34. From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms: a. is the top point. b. is the point closest to the vertical axis. c. is the point half way between the two end points. d. cannot be determined since firms vary in their willingness to accept risk. 35. Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar. Which of the following is true? a. Japanese exporters can increase American sales by shifting operations from their British subsidiaries to Japan. b. British exporters can increase American sales by shifting operations from their Japanese subsidiaries to Britain. c. American exporters can increase sales to Japan by shifting operations from Japanese subsidiaries to American subsidiaries. d. B and C 36 . A U.S. firm has received a large amount of cash inflows periodically in Swiss francs as a result of exporting goods to Switzerland. It has no other business outside the U.S. It could best reduce its exposure to exchange rate risk by: a. issuing Swiss franc-denominated bonds. b. purchasing Swiss franc-denominated bonds. c. purchasing U.S. dollar-denominated bonds. d. issuing U.S. dollar-denominated bonds. 37. Petrus Company has a unique opportunity to invest in a two-year project in Australia. The project is expected to generate 1,000,000 Australian dollars (A$) in the first year and 2,000,000 Australian dollars in the second. Petrus would have to invest $1,500,000 in the project. Petrus has determined that the cost of capital for similar projects is 14%. What is the net present value of this project if the spot rate of the Australian dollar for the two years is forecasted to be $.55 and $.60, respectively? a. $2,905,817. b. ?$94,183. c. $916,128. d. none of the above 38. An MNC is considering establishing a two-year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12%. The required rate of return on this project is 18%. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage value. Assume no taxes, and a stable exchange rate of $.60 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value? a. about NZ$11 million. b. about NZ$15 million. c. about NZ$31 million. d. about NZ$37 million. e. about NZ$25 million. 39. Which of the following tax-related factors need not be considered in assessing a foreign target? a. corporate tax rates in the host country. b. withholding tax rates in the host country. c. withholding tax rates in the home country. d. corporate tax rates in the home country. e. all of the above must be considered in assessing a foreign target. 40. Which of the following is not a reason why the valuation of a foreign target may vary among MNCs? a. Differences in estimated cash flows to be generated by the foreign target b. Differences in estimated exchange rates c. Differences in required rates of return d. All of the above are possible reasons why the valuation of a foreign target may vary among MNCs 41. As far as the managerial talent of the target is concerned: a. the manner in which the acquirer plans to deal with the managerial talent will affect the estimated cash flows to be generated by the target. b. downsizing will reduce expenses and increase productivity and revenues. c. governments of some countries are likely to intervene and prevent the acquisition if downsizing is anticipated. d. all of the above e. A and C only 42. The most important variable in determining a country's degree of overall country risk: a. is political risk. b. is financial risk. c. is the probability of a host government takeover. d. may often vary with the country of concern. 43. When determining whether a particular proposed project in a foreign country is feasible: a. a country risk rating can adequately substitute for a capital budgeting analysis. b. country risk analysis should be incorporated within the capital budgeting analysis. c. the effect of country risk on sales revenue is more important than the effect on cash flows. d. the project with the highest country risk rating (lowest country risk) should be accepted. e. B and D 44. An MNC considers direct foreign investment in Germany. It is mainly concerned with the subsidiary's ability to generate sufficient sales there. The country risk characteristic that would best address this concern is: a. the host government's tax rates charged on remitted earnings. b. the possibility of blocked funds. c. the state of the economy in Germany. d. the possibility of a withholding tax imposed by the German government. 45. A mild form of political risk is a tendency of residents to purchase only: a. imported products. b. locally produced products. c. products produced by MNCs. d. none of the above 46. Assume the following information for Pexi Co., a U.S.-based MNC that is considering obtaining funding for a project in Germany: U.S. risk-free rate = 4% German risk-free rate = 5% Risk premium on dollar-denominated debt provided by U.S. creditors = 3% Risk premium on euro-denominated debt provided by German creditors = 4% Beta of project = 1.2 Expected U.S. market return = 10% U.S. corporate tax rate = 30% German corporate tax rate = 40% What is Pexi's cost of dollar-denominated debt? a. 7.0%. b. 8.0%. c. 6.3%. d. 4.9%. 47. Assume the following information for Pexi Co., a U.S.-based MNC that is considering obtaining funding for a project in Germany: U.S. risk-free rate = 4% German risk-free rate = 5% Risk premium on dollar-denominated debt provided by U.S. creditors = 3% Risk premium on euro-denominated debt provided by German creditors = 4% Beta of project = 1.2 Expected U.S. market return = 10% U.S. corporate tax rate = 30% German corporate tax rate = 40% What is Pexi's cost of dollar-denominated equity? a. 12.0%. b. 11.2%. c. 10.0%. d. 7.2%. 48. Which of the following is probably the best method of incorporating country risk into a capital budgeting analysis? a. Adjusting the discount rate upward b. Adjusting the input variables to estimate the sensitivity of the project's NPV c. Adjusting the political risk rating to obtain a more favorable NPV d. Country risk should be ignored in capital budgeting, since it is a subjective analysis. 49. Spears Co. will receive SF1,000,000 in 30 days. Use the following information to determine the total dollar amount received (after accounting for the option premium) if the firm purchases and exercises a put option: Exercise price = $.61 Premium = $.02 Spot rate = $.60 Expected spot rate in 30 days = $.56 30-day forward rate = $.62 a. $630,000. b. $610,000. c. $600,000. d. $590,000. e. $580,000. 50. Assume a U.S.-based subsidiary wants to raise $1,000,000 by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is $.02. Thus, the MNC needs ____ rupees to obtain the $1,000,000 needed. a. 50,000,000 b. 20,000 c. 1,000,000 d. none of the above 1. Which of the following Investors will potentially receive dividends on their investments? A) Bond holders B) Share holders C) Creditors D) Derivative holders E) Both B and D are correct. 2. A security whose value is based solely on the value of other assets is called a ________ security. A) capital option B) hedging C) derivative D) asset alternative E) none of the above 3. When you borrow money to pay for your investments you are ________. A) increasing your purchasing power B) practicing leverage C) starting a poor habit D) attempting something that can't be done E) A and B 4. Lavon has his money invested into an asset that has averaged the following returns the last three years: +22%, -8%, +13%. Most likely what type of asset is he invested in? A) Corporate bonds B) Income producing Real Estate C) Gold coins D) Common stock 5. Latisha invested $1,000 in XYZ stock. Two years later she sold the stock for $1,200. During the time she owned the stock, she received a total of $80 in dividends. What was her total return on investment? A) 8% B) 20% C) 28% D) not enough information available. 6. Tran purchased a house for a rental property for $100,000 five years ago. During the time he owned this rental, his net rent was a total of $4,000. He just sold the property for $120,000. What was his average annual return on this investment? A) 4.0% B) 4.8% C) 24% D) not enough information available. 7. Juan purchased shares in ABC company for $5,000 three years ago. During these three years he received $600 in dividends. He just sold the stock for $4,300. What was his total return on this investment? A) 2% B) 12% C) 14% D) 26% 8. Louis purchased $5,000 worth of stock three years ago and sold it today for $7,000. He received no dividends from this investment. Inflation averaged 4% during the three years he owned the stock. What was his average real return per year on this investment? A) 4% B) 9.33$ C) 13.33% D) 40% 9. Most of the bonds that are bought and sold are not transacted on the organized exchanges. They are bought and sold through bond dealers who do not sell many ________ bonds but do trade many ________ bonds in the secondary market. A) corporate; government B) government; corporate C) high par value; corporate D) government; low par value E) corporate; low par value 10. Patti DeVry has been trading stocks in the over-the-counter market. When she wants to sell her stocks she will receive the ________ price and when she wants to purchase stocks she will pay the ________ price. A) ask; bid B) bid; ask C) starting; minimum D) ask; minimum E) bid; minimum 11. Your next-door neighbor, a kind, elderly lady, just discovered that her stock account had been excessively traded in an inappropriate manner, mainly to generate excess commissions. This is an example of ________. A) account theft B) black market trading C) high turnover trading D) churning E) none of the above 12. Barney Q. Hopkins borrows stock from his broker (short selling) with the goal of ________ and ________. A) buying low; selling later B) buying low; selling low C) buying high; selling low D) selling high; later buying low E) borrowing money; buying low 13. Assume you have a 50% margin requirement. You purchase 100 shares of Microsoft at $150 per share, maximizing your margin. The price increases to $175 per share. What is the net value of your investment (margin) now? A) $17,500 B) $15,000 C) $ 7,500 D) $ 3,750 E) none of the above 14. You have just purchased 10 shares of a stock selling at $50 per share. Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding. Which of the following statements is most correct? A) You could lose up to your $500 investment. B) You could lose more than your $500 investment. C) You cannot lose your investment based on the actions of the company. D) By owning stock in the company, you have also technically violated the law. E) none of the above 15. The net income of the firm is $4 million dollars. The firm will pay $500,000 in dividends to the preferred shareholders. There are currently 1 million shares of common stock outstanding. What are the earnings per share for this firm? A) $4.00 B) $3.50 C) $4.50 D) None of the above are correct 16. The firm will pay an annual dividend this year of $2 per share. The current market price of the stock is $40.00 per share. The book value of this stock is $24.00 per share. The earnings per share for this firm is $5.75. What is the current dividend yield of this stock? A) 14.38% B) 8.33% C) 23.9% D) 5% 17. The firm will pay an annual dividend this year of $2 per share. The current market price of the stock is $40.00 per share. The book value of this stock is $24.00 per share. The earnings per share for this firm is $5.75. What is the current dividend yield of this stock? A) 14.38% B) 8.33% C) 23.9% D) 5% 18. At what point do you purchase common stock without a right to a declared dividend? A) dividend payout date B) declaration date C) ex-dividend date D) cut-off point E) end of fiscal year 19. Which of the following company's stock has the most potential to provide you with a capital gain in the future? A) XYZ with a dividend yield of 6% B) 123 with a P/E ratio of 12 C) ABC with a P/E ratio of 39 D) 555 with a market to book ratio of 2.2 E) OXX with a market Cap of $336 million dollars. 20. Which of the following company's stocks has the highest risk of losing some or all of your investment? A) XYZ which is part of the DJI. B) 333 with a dividend yield of 4.5% C) ABC with a P/E ratio of 70 D) Not enough information provided. 21. A stock currently sells for $50 per share, and has a forecasted dividend of $6.00 per share. There are currently 100,000 shares outstanding and the stock has a P/E ratio of 14.00. What is the dividend yield? A) 10% B) 12% C) 24% D) 28% E) none of the above 22. A company has total assets of $10,000,000 and no outstanding debt. The closing price of the stock is $45.75 per share, and there are 200,000 shares outstanding. It has paid common dividends of $250,000. What is the book value per share? A) $25.00 B) $40.25 C) $45.75 D) $50.00 E) none of the above 23. You are considering leveraging an investment of $50,000. You would borrow $40,000 at 10% and provide the balance yourself. If this investment increased in value by the end of the year by 30% what is your rate of return? A) 10% B) 20% C) 30% D) 50% E) none of the above 24. ComChip is a computer chip manufacturer. Its stock is selling at $50 per share. Estimated earnings next year total $200,000. The company currently has 100,000 shares of common stock outstanding and will pay $20,000 in dividends. What is the firm's P/E ratio? A) 50.00 B) 45.80 C) 25.00 D) 27.78 E) none of the above 25. What is the value of a $1,000 par value bond with a 12% annual coupon that will mature in 5 years if the bond is currently priced to yield 10%? A) $955.76 B) $1,000.00 C) $1,075.81 D) $1,158.52 E) none of the above 26. You have a corporate bond that pays interest every six months. It carries a coupon rate of 10%. What is your accrued interest on the bond if it has been four months since interest was last paid? A) $33.33 B) $50.00 C) $66.66 D) $100.00 E) none of the above 27. Sherman has three bonds with a $1,000 par value that pay a 9 % coupon interest rate. How much will he earn every six months? A) $27 B) $ 90 C) $135 D) $202.50 E) $270 28. Suppose that you have a bond that has a par value of $1,000 and a coupon interest rate of 9%. Its current price is $950 and it will mature in 7 years. What is the approximate yield to maturity? A) 9.00% B) 9.50% C) 9.96% D) 10.23% E) none of the above 29. Suppose that you just purchased a $1,000 Treasury Inflation-Indexed Bond which carried an original interest rate of 3.375%. The consumer price index just increased by 5% increasing the par value of the bond to $1,050. What is your interest payment considering this change? A) $31.75 B) $33.75 C) $35.43 D) $50.00 E) none of the above 30. Suppose you just purchased a corporate bond at 95 1/8. It carries a 7% coupon rate, will mature in 5 years and is priced to yield 8.22%. What is the annual interest payment to you? A) $70.00 B) $82.22 C) $95.125 D) $100.00 E) none of the above 31. Your required rate of return on company XYZ's preferred stock is 12%. There preferred stock pays a fixed annual dividend of $4.00. What market price would you be willing to pay for a share of XYZ preferred? A) $4.00 B) $33.33 C) $48.00 D) $54.44 32. Which of the following statements regarding Funds A and B are true? Assume that you would invest $10,000 and would sell the fund after 4 years. Further assume that each fund will earn a total return each year before expenses of 15%. Fund A Fund B Front-end Load 7.50 % 4.50% Back-end Load 0.00% 3.00% within 3 years Management Fee 1.50% 0.50% 12b-1 fee 0.00% 1.50% A) Fund A would provide a higher total return during the holding period. B) Fund A would have higher annual expenses during the holding period. C) Fund B would require paying a back-end load when sold. D) Fund B would have lower annual expenses during the holding period. E) None of the above are true. 33. Total returns on mutual funds can be calculated by adding dividends distributed, capital gains distributed, and ________ and dividing this sum by the beginning net asset value. A) beginning NAV - ending NAV B) ending NAV - beginning NAV C) dividends undistributed + capital gains undistributed D) beginning NAV + ending NAV E) ending NAV + beginning NAV 34. Zippo Mutual Fund is one of your best performers. It just announced a year-end distribution of $3.50 per share in capital gains and $1.50 in dividends. Assuming the NAV increased from $29.50 to $33.50, calculate your total annual return? A) 30.51% B) 26.87% C) 16.95% D) 14.93% E) none of the above 35. You purchased 100 shares of Gibraltar Strength Fund for $12.75 per share. Its current NAV is 18.75 per share. There was a total of $0.25 in dividends and $0.75 in capital gains distributed. What is your total return? A) 32.00% B) 37.33% C) 47.06% D) 54.90% E) none of the above 36. What does the following mathematical expression yield? (total market value of all securities - liabilities) divided by (total shares outstanding) = ________. A) asset value B) net value C) net asset value D) net return value E) asset return value 37. You purchased 1000 shares of fund ABC for $35.00 NAV per share. While you owned these shares you received $150 in dividend distributions and $350 in capital gains dis
Question 3
Problem One A book-selling company has a head office and 25 shops, each of which holds cash (bank notes, coins, and credit card vouchers) at the statement of financial position date. There are no receivables. Accounting records are held at shops. Shops make returns to head office and head office holds its own accounting records. Your firm has been hired as a forensic auditor for the company and has offices near to the location of some but not all of the shops. List the audit objectives for the audit of cash and state how you would gain the audit evidence in relation to those objectives at year end. Problem Two Bardwell is a privately owned incorporated business that operates a garage which repairs and services motor vehicles. Most customers are required to pay cash or check on collecting their vehicle. Credit accounts are available to business customers. These customers sign the invoice on collection of the vehicle and their business is billed monthly. Separate series of pre-numbered invoices are drawn up by the foreman for cash sales and for credit sales. All customer accounts are maintained by the receptionist. His duties include the following: Cash Sales --Collect cash or checks from customers on collecting their vehicle --At the end of the day, check the numerical sequence of cash sale invoices, add the sales total and agree the total to the amount of cash and checks received --Record the total cash sales in the cash receipts book Credit Sales --Obtain the customer?s signature on the invoice copy of business account customers --Enter the invoices in numerical sequence in the sales journal and post the customer?s account in the A/R ledger --Send monthly statements to credit account customers and follow up overdue accounts --List the balances on the A/R ledger at the end of the month and reconcile the total with the control account in the G/L Cash Receipts --Open the mail, extract checks from credit account customers, record them in the case receipts book, and post the A/R ledger --Make up the day?s banking cash and checks from both cash and credit sales, prepare the deposit slip and bank the cash and checks All other accounting duties are the responsibility of two further accounts clerks and all are subject to supervision by the garage manager. Required: As a member of the audit staff of the company?s external auditors, you visit the garage and make a count of cash on hand. You subsequently compare details of unbanked cash receipts that you counted with the entry in the cash receipts book for that date. Although the total in the cash receipts book is the same, the amount of banknotes and coins is less and there is a check from a business customer that you did not record. 1 Explain the procedures to be followed in making a cash count for audit purposes. 2 Explain the irregularity that the discrepancy between cash count and cash receipts book might lead you to suspect, and describe how you would investigate the discrepancy.,"Dear Student, Please provide me the word limit and also increase the deadline by at least by 15 hours so that i can provide you with the solution.." My homework problems are essay questions. Minimum words for each question might be 150 to 200. However, I can expand the total number of words to a degree and refine the answer on my own after I receive your answers. I just need understandable solutions so I can grasp the concepts and have successful responses to the problems. Unfortunately, I can?t increase the deadline by that amount of time. I really need the answers by 4:00 P.M. today (Saturday, July 31, 2010) Eastern time. I see that you have accepted my assignment and started working on it (your second message). Please let me know as soon as possible if you are going to make the deadline. Thank you very much.
Question 4
1. (TCO C) Firm organization Until this year, Cheers Inc. was organized as a partnership. This year, the partners have decided to organize the business as a corporation. As a result of this change in organizational form, choose the statement that is most correct and explain why? a. Cheers? shareholders (the ex-partners) will now have limited liability. b. Cheers will now be subject to fewer regulations. c. Cheers will now pay less in taxes. d. Cheers? investors will now find it more difficult to transfer ownership. e. Cheers will now find it more difficult to raise additional capital. 2. (TCO D) After-tax returns West Corporation has $50,000 which it plans to invest in marketable securities. The corporation is choosing between the following three equally risky securities: Alachua County tax-free municipal bonds yielding 6 percent; Exxon bonds yielding 9.5 percent; GM preferred stock with a dividend yield of 9 percent. West's corporate tax rate is 35 percent. What is the after-tax return on the best investment alternative? (Assume the company chooses on the basis of after-tax returns.) 3. (TCO D) Bond value - semiannual payment Assume that you wish to purchase a 10-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $50. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? 4. (TCO E) Constant growth stock The last dividend paid by ABC Company was $2.00. ABC?s growth rate is expected to be a constant 4 percent. ABC's required rate of return on equity (ks) is 9 percent. What is the current price of ABCs common stock? 5. (TCO B, F) NPV As the director of capital budgeting for ABC Corporation, you are evaluating two mutually exclusive projects with the following net cash flows: Cash Flows A B -$200,000 -$125,000 1 $65,000 $60,000 2 $60,000 $40,000 3 $50,000 $40,000 4 $65,000 $35,000 5 $50,000 $45,000 If ABC Corporation's cost of capital is 12 percent, defend which project would you choose. 6. (TCO G) Cash budget ABC Corporation's budgeted monthly sales are $4,000. Forty percent of its customers pay in the first month and take the 3 percent discount. The remaining 60 percent pay in the month following the sale and don't receive a discount. ABC's bad debts are very small and are excluded from this analysis. Purchases for next month's sales are constant each month at $2,000. Other payments for wages, rent, and taxes are constant at $500 per month. Construct a single month's cash budget with the information given. What is the average cash gain or (loss) during a typical month for ABC Corporation? 7. (TCO B) Permanent assets financing Wicker Corporation is determining whether to support $100,000 of its permanent current assets with a bank note or a short-term bond. The firm's bank offers a two-year note where the firm will receive $100,000 and repay $118,810 at the end of two years. The firm has the option to renew the loan at market rates. Alternatively, Wicker can sell 8.5 percent coupon bonds with a 2-year maturity and $1,000 par value at a price of $973.97. How many percentage points lower is the interest rate on the less expensive debt instrument? 8. (TCO C) Whick of the following bank accounts has the highest effective return and why? A. An account which pays 10% nominal interest with monthly com-pounding. B. An account which pays 10% nominal interest with daily com-pounding. C. An account which pays 10% nominal interest with annual com-pounding. D. An account which pays 9% nominal interest with daily com-pounding. E. All of the investments above have the same effective annual return. 9. (TCO D) All treasury securiities has a yiel to maturity of 7%-- so the yield curve is flat. If the yield to maturiy on all Treasuries were to decline to 6%, which of the following bonds would have the largest percentage increase in price and why? A. 15 year zero coupon Treasury bond. B. 12 year Treasury bond with a 10% annual coupon. C. 15 year Treasury bond with a 12 percent annual coupon. D. 2 year zero coupon Treasury bond. E. 2 year Treasury bond with a 15% annual coupon. 10. (TCO C) Payback period Haig Aircraft is considering a project which has an up-front cost paid today at t = 0. The project will generate positive cash flows of $60,000 a year at the end of each of the next five years. The project's NPV is $75,000 and the company's WACC is 10 percent. What is the project's simple, regular payback? 11. (TCO H) WACC A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information, calculate the firm's weighted average cost of capital. rd= 6% Tax rate = 40% P0 = $25 Growth = 0% D0 = $2.00 1. (TCO A) Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points: 5) Reduced legal liability for investors. Harder to transfer ownership. Lower taxes. Most common form of organization. 2. (TCO A) Buying assets needed to operate a business is an example of a(n) (Points: 5) delivering activity. financing activity. investing activity. operating activity. 3. (TCO A) For 2007 Landford Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 6,000. There were no preferred stock dividends. What was the 2007 earnings per share? (Points: 5) $4.66 $0.20 $66.67 $5.00 4. (TCO C) Free cash flow provides an indication of a company?s ability to (Points: 5) generate cash to invest in new capital expenditures. generate net income. generate cash to pay dividends. both a and c. 5. (TCO C) The dividend account (Points: 5) is increased with a debit. is decreased with a credit. is not an expense account. all of the above 6. (TCO A, B) Kerner Company showed the following balances at the end of its first year: Cash $10,000 Prepaid insurance 1,000 Accounts receivable 5,000 Accounts payable 4,000 Notes payable 6,000 Common stock 2,000 Dividends 1,000 Revenues 30,000 Expenses 25,000 What did Kerner Company show as total credits on its trial balance? (Points: 5) $43,000 $41,000 $42,000 $44,000 7. (TCO B, E) Under the accrual basis of accounting (Points: 5) cash must be received before revenue is recognized. net income is calculated by matching cash outflows against cash inflows. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. 8. (TCO A, B) Reese Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,600 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be (Points: 5) Debit Office Supplies Expense, $1,600; Credit Office Supplies, $1,600. Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400. Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400. Debit Office Supplies, $1,600; Credit Office Supplies Expense, $1,600. 9. (TCO E) Baxtor Company purchased merchandise inventory with an invoice price of $5,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Baxtor Company pays within the discount period? (Points: 5) $5,000 $4,920 $4,900 $4,000 10. (TCO B) At the beginning of the year, Midtown Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,600,000. If Midtown Athletic reported ending inventory of $600,000 and sales of $2,000,000, their cost of goods sold and gross profit rate must be (Points: 5) $1,000,000 and 50% $1,400,000 and 30% $1,000,000 and 30% $1,400,000 and 70% 11. (TCO D) In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? (Points: 5) FIFO LIFO Average Cost Method Income tax expense for the period will be the same under all assumptions. 12. (TCO D) An aircraft company would most likely have a (Points: 5) high inventory turnover. low profit margin. high volume. low inventory turnover. 13. (TCO D) A very small company would have the most difficulty in implementing which of the following internal control activities? (Points: 5) Separation of duties Limited access to assets Periodic independent verification by and external auditor. Sound personnel procedures 14. (TCO D) Which of the following is not a suggested procedure to establish internal control over cash disbursements? (Points: 5) Anyone can sign the checks. Different individuals approve and make the payments. Blank checks are stored with limited access. The bank statement is reconciled monthly. 15. (TCO A, B, D) An aging of a company's accounts receivable indicates that $4,000 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a (Points: 5) debit to Bad Debts Expense for $4,000. debit to Allowance for Doubtful Accounts for $5,200. debit to Bad Debts Expense for $5,200. credit to Allowance for Doubtful Accounts for $4,000. . (TCO A, B, D) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000 at the end of the year. If the balance of the Allowance for Doubtful Accounts is $2,000 credit before adjustment; what is the amount of bad debt expense for that period? (Points: 5) $10,000 $8,000 $12,000 $2,000 2. (TCO A, E) Brown Clinic purchases land for $120,000 cash. The clinic assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land graded for $2,200. What amount does Brown Clinic record as the cost for the land? (Points: 5) $122,200 $120,000 $124,700 $122,500 3. (TCO A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be (Points: 5) $14,160. $11,760. $9,840. $9,600. 4. (TCO D) Ron's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Ron's Pharmacy make to show the March remittance? (Points: 5) Dr Sales Tax Expense 600 Cr Cash 600 Dr Sales Taxes Payable 600 Cr Cash 600 Dr Sales Tax Expense 600 Cr Sales Taxes Payable 600 No entry required. 5. (TCO D) Lopez Corporation issues 500, 10-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a (Points: 5) debit to Cash of $500,000. credit to Discount on Bonds Payable for $20,000. credit to Bonds Payable for $480,000. debit to Cash for $480,000. 6. (TCO A) If Kiner Company issues 1,000 shares of $5 par value common stock for $70,000, the account (Points: 5) Common Stock will be credited for $5,000. Paid-in Capital in Excess of Par Value will be credited for $5,000. Paid-in Capital in Excess of Par Value will be credited for $70,000. Cash will be debited for $65,000. 7. (TCO A, C) Outstanding stock of the Apex Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 6%, $10 par non-cumulative preferred stock. In 2006, Apex declared and paid dividends of $2,000. In 2007, Apex declared and paid dividends of $6,000. How much of the 2007 dividend was distributed to preferred shareholders? (Points: 5) $4,000 $7,000 $3,000 None of the above 8. (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is (Points: 5) $120,000. $125,000. $155,000. $115,000. 9. (TCO C) Wilton Company reported net income of $40,000 for the year. During the year, accounts receivable increased by $7,000, accounts payable decreased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is (Points: 5) $30,000. $45,000. $39,000. $35,000 10. (TCO F) One variation of the horizontal analysis is known as (Points: 5) nonlinear analysis. vertical analysis. trend analysis. common size analysis. 11. (TCO F) Vertical analysis is also known as (Points: 5) perpendicular analysis. common size analysis. trend analysis. straight-line analysis. 12. (TCO F) The best way to study the relationships among the components within a financial statement is to prepare (Points: 5) a vertical analysis. a trend analysis. profitability analysis. comparative analysis. 13. (TCO F) In vertical analysis, the base amount for studying salary & wages expense is generally (Points: 5) net sales. salary & wages expense in a previous year. gross profit. net income. 14. (TCO F) A common measure of profitability is the (Points: 5) current ratio. current cash debt coverage ratio. return on common stockholders? equity ratio. debt to total assets. 15. (TCO F) Long-term creditors are usually most interested in evaluating (Points: 5) liquidity. marketability. profitability. solvency. . (TCO A) The partial financial statement items below were taken from the financial statements of Prone, Inc. This information can be used to correctly solve each of the ratios below. The information is in alphabetical order. Accounts payable $ 28,000 Net income $ 48,000 Accounts receivable 66,000 Other current liabilities 17,000 Cash 54,000 Total assets 250,000 Gross profit 160,000 Total liabilities 200,000 Income before income taxes 54,000 Wages payable 5,000 Additional information: The number of average common shares outstanding during the year was 40,000. Instructions: Compute the following: (a) Current ratio. (b) Working capital. (c) Earnings per share. (d) Debts to total assets ratio. To earn full credit, you must show the formula you are using, show your computations and explain the meaning of each of your ratio results. (Points: 25) 2. (TCO B & E) These financial statement items are for Snyder Corporation at year-end, July 31, 2010. Salaries payable $ 2,580 Salaries expense 48,700 Utilities expense 22,600 Equipment 21,000 Accounts payable 4,100 Commission revenue 61,100 Rent revenue 8,500 Long-term note payable 1,800 Common stock 16,000 Cash 24,200 Accounts receivable 9,780 Accumulated depreciation 6,000 Dividends 5,000 Depreciation expense 4,000 Retained earnings (beginning of the year) 35,200 Instructions: Prepare an income statement and a retained earnings statement for the year. (Points: 25) 3. (TCO C) Using the indirect method, calculate the amount of cash flows from operating activities using the indirect method from the following data: Net income $230,000 Beginning accounts receivable 22,000 Ending accounts receivable 26,000 Beginning prepaid expenses 5,000 Ending prepaid expenses 2,000 Beginning accounts payable 15,000 Ending accounts payable 14,000 Depreciation expense 55,000 Amortization of intangible asset 3,000 Dividends declared and paid 11,000 (Points: 25) 4. (TCO D) Your friend, Jeff, has opened a movie theater. Jeff states that he does not have time to develop and implement a system of internal controls. a. Provide Jeff with the objectives of a system of internal control. b. Explain to Jeff why he should develop a system of internal control. (Points: 25)
Question 5
(Intangible Amortization) Presented below is selected information for Palmiero Company. Answer the questions asked about each of the factual situations. (If answer is zero, please enter 0. Do not leave any fields blank.) Palmiero purchased a patent from Vania Co. for $1,616,600 on January 1, 2008. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2018. During 2010, Palmiero determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2010? $ Palmiero bought a franchise from Dougherty Co. on January 1, 2009, for $330,200. The carrying amount of the franchise on Dougherty's books on January 1, 2009, was $501,300. The franchise agreement had an estimated useful life of 30 years. Because Palmiero must enter a competitive bidding at the end of 2018, it is unlikely that the franchise will be retained beyond 2018. What amount should be amortized for the year ended December 31, 2010? $ On January 1, 2010, Palmiero incurred organization costs of $259,050. What amount of organization expense should be reported in 2010? $ Palmiero purchased the license for distribution of a popular consumer product on January 1, 2010, for $176,240. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Palmiero can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2010? $
