Question 1
"7. Only a cash basis partnership is concerned with the problem of ?unrealized receivables?. True or False 17. Rachael and Ray form an equal partnership R&R on January 1, 20X1. Rachael contributes $100,000 in exchange for her one-half interest; Ray contributes land worth $100,000. Rays adjusted basis in the land is $30,000. Which of the following statements is accurate with respect to this exchange? a. Neither Rachael, Ray, nor R&R recognize any gain or loss on the transfer. b. Ray recognizes $70,000 gain on the transfer. c. R&R recognizes $70,000 gain on the transfer. d. b. and c. 18. Wayne owns 60 percent and Larry owns 40 percent of the profits and losses of the WL partnership. On January 1, 20X4, the basis in their respective partnership interests is $60,000 and $10,000. During 20X4, WL reports taxable ordinary income of $50,000 and has the following separately stated items: qualified dividend income of $1,000; taxable interest income of $2,600; charitable contributions of $3,000; and Sec. 179 expense of $20,000. During the year, partnership liabilities decreased by $25,000 and there were no distributions made to either partner. On December 31, 20X4, which of the following correctly states the basis in each partners interest in WL? a. Wayne: $63,360 and Larry: $12,240 b. Wayne: $65,520 and Larry: $12,680 c. Wayne: $90,360 and Larry: $30,240 d. Wayne: $92,160 and Larry: $31,440 20. On April 1, George Hart, Jr. acquired a 25 percent interest in the Wilson, Hart, and Company partnership by gift from his father. The 25 percent partnership interest had been acquired by a $50,000 cash investment by Hart, Sr. 10 years ago. The fair market value of Hart, Sr.?s partnership interest was $60,000 at the time of the gift. Hart, Jr. sold the 25 percent interest for $85,000 on December 17. What type and amount of capital gain should Hart, Jr. report on his tax return? a. Long-term capital gain of $25,000 b. Short-term capital gain of $25,000 c. Long-term capital gain of $35,000 d. Short-term capital gain of $35,000 23. Magda Shaw?s adjusted basis for her partnership interest in Shaw & Zack was $60,000. In complete liquidation of her interest in Shaw & Zack, Shaw received cash of $44,000 plus the following assets: Adjusted Basis to Shaw & Zack Fair Market Value to Shaw & Zack Land?Tract A $24,000 $10,000 Land?Tract B 8,000 8,000 How much is Shaw?s basis for Tract B? a. $16,000 b. $8,000 c. $ 7,111 d. $ 4,000 ",Hi, Hope you are well! My assignment is due tomorrow night. So, unfortunately, I can't extend it any longer. If you don't have time to review, please just decline it. Thanks!
Question 2
Summary Paper: Submit an eight-page paper (excluding cover page and references): Describing an organizational change that your organization is likely to make (e.g., new structure, new process, downsizing, etc.). Identifying the key stakeholders involved and the impact the change would have on them. Describing the change management approach and recommended action steps you would advise for minimizing adverse impact on the organization and its people. The paper should focus on the systemic nature of the organization and how the change will improve the effectiveness of the organization, its processes and the productivity of the employees. Summary Paper requirements: -Must be eight double-spaced pages in length and formatted according to APA style. -Must include a cover page that includes: -Title of paper -Date submitted -Must include an introductory paragraph with a succinct thesis statement -Must address the topic of the paper with critical thought. If possible, provide a context of a first-person experience where you saw this academic concept in operation. Do not simulate third-party statements of experience -Must conclude with a restatement of the thesis and a conclusion paragraph -Must use APA style as outlined in the approved style guide to document all sources -Must include, on the final page, a Reference List that is completed according to APA style. ***USE CORRECT APA FORMAT with HEADINGS***
Question 3
If your team is assigned the lead for this case, your team answers to the questions below must be posted by noon ET the first day of Session eight (on Monday) to receive full credit (on a 10 point scale). Late Answers will be penalized two grades for late posting up to one day late. After one day, any team or individual may post their answer. After the lead answer is posted, the other teams and members of the class are encouraged to extend/qualify the posted response, or express a different take on the issues raised. Case discussion will contribute to either the team case project or course participation portion of your grade, as appropriate Home Depot, Inc. in the New Millennium This is a follow on case to an earlier case on Home Depot, which was set in 1986 (its early years) when the company was experiencing growth pains. This new case is set in fiscal year 2000 (fiscal year ending January 31, 2001). By the time of this case, Home Depot has become a storied stock with a tremendous track record of growth and profitability over the past fifteen years. The case allows us to examine the drivers of Home Depot?s strong track record, and assess whether the company?s performance is sustainable at the same level into the future. We can also assess the assumptions about growth and profitability needed to justify the company?s current stock price, and examine whether this performance can be achieved in light of the company?s stated growth strategy. The case has financial performance till January 31, 2000 since the case is set in October 2000. The attached excel worksheet with financial statement data for the fiscal year ending January 31, 2001 is provided to help focus the forecasting and valuation analysis beginning February 1, 2001. At that time, the company was trading at $48.20 which is given in the assignment questions below. Assigned Case Questions: 1. Assess Home Depot?s financial performance from 1986 to 1999. How did the company achieve such a spectacular performance? What explains the decline in performance in 2000? The following data might be helpful in your analysis. Sales Growth and Profitability Ratios Average for fiscal years 1986 to 1999 Fiscal year 1999 Fiscal year 2000 Sales Growth Rate 27.2% 19% Return on Equity (ROE) 25.2% 26.5% 20.9% NOPAT/Sales 4.7% 6.0% 5.6% Sales/Net Assets 4.34 3.75 3.53 Operating ROA 19.6% 22.6% 19.8% Spread 18.4% 22.9% 22.4% Net Financial Leverage 0.37 0.17 0.05 Financial Leverage Gain 5.7% 4.0% 1.1% 2. What is your estimate of the intrinsic value of Home Depot's stock as of February 1, 2001, assuming that it will have: (a) the same sales growth rate as in fiscal 2000 for the next fifteen years, (b) a growth rate of 11% beyond year 15, (c) maintain its fiscal 2000 NOPAT margin for the next 15 years and beyond, (d) maintain its fiscal 2000 net working capital to sales ratio, net operating assets to sales ratio for the next 14 years and beyond, (e) maintain its fiscal 2000 book net debt to net capital ratio for the next fourteen years and beyond, (f) a risk free rate of 5.8%, cost of debt of 6%, common equity beta of 1.09, and a market risk premium of 7%. 3. What set of assumptions regarding Home Depot's future growth rate, NOPAT margin, are consistent with its observed stock price of $48.20 on February 1, 2001? Assume that all the other assumptions remain the same as in question 2, except for the market risk premium, which is now assumed to be only 4%. 4. Do you think Home Depot can achieve the performance assumptions in question 2, based on its growth strategy? Financial Statement Data
Question 4
Myron M. Fox, Rhoda R. Fiori, Cassandra P. Martin and Henrietta Q. Pasquale are equal partners in FFMP, LLP, a small business consulting services firm. The partners are not related and all are U.S. citizens. The limited liability partnership uses the cash basis and the calendar year and began operations on January 1, 2006. Since that time, it has experienced significant growth each year. The following information was taken from the LLP's income statement for the current year. Revenues $800,000 Fees Collected 3,600 Dividend income (all qualified) 1,400 Taxable business interest 2,600 Long-term capital loss (4,000) Total Revenues 803,600 Expenses $12,000 Accounting fees $12,000 Advertising 5,000 Contribution to United Fund Charity 2,000 Depreciation Expense 8,119 Employee salaries 340,000 Guaranteed payment, Myron M. Fox, office manager 140,000 Entertainment, before 50% disallowance 2,600 Travel 6,000 Equipment rental 6,000 Office rentals paid 7,000 Interest expense 4,000 Insurance Premiums 2,200 Office Expense 20,481 Payroll taxes 25,600 Utilities 15,700 Total Expenses 602,700 The partnerships placed its $65,000 of furniture and fixtures in service on January 1, 2006. This year, it claimed $8,119 of depreciation expense for both tax and financial accounting purposes. The depreciation creates an adjustment of $156 for alternative minimum tax purposes. No assets were placed in service during the year. On October 15, the partnership sold securities for $40,000; it had purchased the securities for $44,000 on February 3, 2008. The firm's activities do not constitute "qualified production activities" for purpose of the Sec. 199 deduction. Net income per books is $200,900. On January 1, 2009, the partners' capital accounts equaled $60,000 each. No additional capital contributions were made in 2009, and each partner made cash withdrawals of $60,000 during the year. The partnership's balance sheet as of December 31, 2009, is as follows. Beginning Ending Cash $86,576 ? Tax-exempt securities 52,000 52,000 Marketable securities 120,000 76,000 Office furniture and equipment 65,000 65,000 Accumulated depreciation (36,576) ? --------- -------- Total Assets 287,000 ? Non recourse on debt payable on equipment 47,000 32,000 Capital, Fox 60,000 ? Capital, Fiori 60,000 ? Capital, Martin 60,000 ? Capital, Pasquale 60,000 ? --------- -------- Total liabilities and capital 287,000 ? What is the ending cash balance, accumulated depreciation, and capital given to the four partners at year end December 2009.
Question 5
Caravan Gaming Company is interested in developing a new facility in Brazil. The company estimates that the project would require an initial investment of $31 million. The company expects that the project will produce positive cash flows of $5,050,000 a year at the end of each of the next 15 years. The project's cost of capital is 14%. a. Calculate the expected net present value of the project. b. The company recognizes that the cash flows may be much higher or lower, depending on whether the host government imposes a large facility tax. One year from now, the company will know whether the tax will be imposed. There is a 45 percent chance that the tax will the imposed, in which case the yearly cash flows will be only $4.5 million and there is a 55 percent chance that the tax will not be imposed, in which case the yearly cash flows will be $5.5 million. If the company waits a year to start the project, the initial investment will remain at $31 million, and incoming cashflows will be delayed one year. Using decision tree analysis, calculate the value of the real option to wait a year before deciding. Use a discount rate of 14 percent. c. Discuss 2-3 other factors that the company should consider in making a decision to go ahead with the project now or wait for one year. Please show work in Excel.
