Canvas Corp. is a large construction company that reports under IFRS. They have recently signed a contract with Ontario Tech University to build an addition to the library. Canvas began work on the contract at the beginning of 2020. Contract information and estimates are as follows: Contract price ……………………………………………….. $ 2,000,000 Estimated costs Labour.................................................................................. $ 435,000 Materials and subcontracts ................................................. 765,000 Indirect costs........................................................................ 300,000 1,500,000 Estimated gross profit................................................................... $ 500,000 At the end of 2020, the following was the actual status of the contract: Progress Billings to date ......................... $ 1,115,000 Costs incurred to date: Labour.................................................................................. $ 207,000 Materials and subcontracts ................................................. 468,000 Indirect costs........................................................................ 75,000 Latest forecast of total costs of project (no change).................... $ 1,500,000 At the end of 2021, progress billings to date totalled $1,900,000 and costs incurred to date totalled $1,395,000 with a forecast of $155,000 remaining costs to complete. Cash collected was $980,000 during 2020 and $1,000,000 during 2021. Job is expected to be completed in 2022 Instructions a) Calculate the gross profit that would be reported on this contract for 2020 and 2021. b) Prepare all journal entries for 2020. c) Indicate the account(s) and the amount(s) that would be shown on Canvas’ statement of d) Assume all the same facts, except that the forecast of remaining costs in 2021 is not $155,000, but $555,000. How much income (loss) would Canvas then report for the year 2021? e) Assume you are a shareholder of Canvas Corp. Do you think that recognizing revenue over time rather than at a point in time makes the financial statements more useful? Explain your answer.

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data:

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Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Assume that the distribution of differences is approximately normal, mound-shaped and symmetric. Use a 10% level of significance. Find (or estimate) the P-value.

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Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data: B: Percent for company 21 11 16 20 5 8 4 22 A: Percent for CEO 18 5 14 22 10 12 1 17 Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 1% level of significance. What is the value of the test statistic? Select one: a. -0.730 b. -0.683 c. 0.683 d. 0.730 e. -0.639

If the Johnson Company just acquired a building for $200,000 through financing from Bank of America at a 5% annual interest rate. 20 years to loan maturity. What would be Johnsons monthly mortgage payment? Round the answer to the nearest whole dollar.

Assume you are employed as a counselor at your local high school. You need to conduct a 30-minute interview with a student who has suddenly had a dramatic decline in her grades. Prior to conducting any interview, it is extremely important to plan its structure, the type of information you hope to acquire, the timing and sequencing of the interview, and the types of questions you might want to ask. To prepare for the interview, analyze the structure of the interview and present a summary including the following reasons for your choices:

State the purpose of your interview and Discuss the topics you plan to cover and the sequence in which you will cover them while addressing the questions you will use to obtain the information.

Pensions Address the following elements in the form of a memo to your CEO: A. From AMAZON’s financial information, what type of pension plan does it have? Discuss the reasons why AMAZON has chosen this particular plan. B. What was the effect of the pension plan on AMAZON's financial statements? Defend your response. C. Your CEO has informed you—the controller of AMAZON—that the board of directors has made the decision to look at other options of types of retirement plans. Investigate what other alternatives would be available, and determine which would be appropriate for your particular company.

Quilici Family: Greg and Debra Quilici own a four bedroom home in an affluent neighborhood just north of San Francisco, California. Greg is a partner in the family owned commercial painting business. The family is Composed of Greg (father), Debra (mother), and 5 year old son Brady.Greg is a partner in the family owned commercial painting business.Debra is a housewife

After visiting Lawrence Krause, a family financial planner, Greg and Debra became concerned of their spending, and that they are not putting enough money for their son’s future education needs as well as their own retirementThey have a Koegh plan (retirement plan for self-employed individuals and small businesses in the US), but they did not account for Brady’s education.

Greg earns $95,000 per year, Greg is an alumnus of Stanford University (Tuition = $40,000 per year). Debra graduated from University of North Carolina at Chapel Hill (Tuition = $4,500 per year). The couple wants to send Brady to either school when he turns 18, with a slight preference towards Stanford. The problem, however, is that with the rate at which tuition is increasing the Quilicis are not sure they can raise enough money.

They expect the following things to happen.

• Tuition fees is expected to increase at an annual rate of 6%
• Living expenses are estimated to be $7000 per year for both schools (expecting to grow 3.5% per year)
• The couple can deposit their money into a growth oriented mutual fund at Neuberger and Berman Management, Inc. (historically earning 12% per annum)

The couple wishes to have a pre-determined monthly amount automatically paid from their bank account. When Brady starts college they will slowly liquidate the account by making an annual payment to Brady to cover tuition and living expenses at the beginning of each year for the four years he will be in college.

From the Case above

1. Identify the variables for each university (Tution Fees, Living Expenses, Interest rate, No of years)

2. How much will the tuition and living expenses be per year when Brady is ready to attend Stanford University?

3. How much will the tuition and living expenses be per year when Brady is ready to attend University of North Carolina at Chapel Hill?

4. Once Brady starts college what will his total expenses (future) be in each of his four years for Stanford University?.

5. Once Brady starts college what will his total expenses (future) be in each of his four years for University of North Carolina at Chapel Hill?.

6. Based on your analysis which university shoulf Greg and Deba choose for their son?

Look at the following Balance Sheet and financial information for Flexics Inc. Flexics, Inc. is a leading producer of plasma technology display devices in the USA. One of the company's latest innovations is a patented process that permits the rapid production of customized semiconductor wafers using plasma-based etching technology instead of quartz plates. Flexics, based in Seattle, started business in 1987 and now has production facilities in Vancouver and a research affiliate in Princeton, New Jersey.
In late-1998 Alex Pereira, the founder and CEO of Flexics, was considering options for realization of the value of his shareholding in Flexics. Pereira was seeking a method that would offer greater
FIN 7900, Mergers and Acquisitions – Problem Set Page 2
liquidity and diversification of his and his family's investment in the company. One option was to
talk to investment bankers about an initial public offering (IPO). This would allow him to sell
some or all of his shares in the market. But he was unhappy about the IPO market in the industry,
which was weaker than in 1997 when bankers had talked about an IPO price in the $40-45 range.
In the past year, public offerings of similar technology companies had brought price/earnings ratios
of about 15. A recent private placement of Flexics shares with a venture capital investor had been
done at an effective price of $24 per share. Another possibility was to sell his shares to Photronics,
which was rumored to be interested in buying a stake in Flexics. Among the other options he was
considering was a leveraged buy-out by management. Pereira liked the idea of giving key officers
a greater stake and control, but he wanted to get a good price for his shares. He was willing to
receive payment partly in cash, and partly in the form of a $30 million, 15% pre-payable
subordinated note.
Management had discussed the LBO possibility with Seattle Partners, a venture capital firm that
was familiar with Flexics. The firm's advisors had calculated that of the minimum amount of $216
million needed for the LBO, $20 million would have to come from management, as much as $120
million could be raised through a senior debt issuance led by Bank of America (BofA), and the
remainder from a private equity group led by Seattle Partners. B of A indicated the rate would be
12% and that lenders would need a Net Operating Income/Interest Expense ratio of at least 2x. At
this time 35% of the 9 million shares outstanding were held by the founder and his family, and the
remainder was held by venture capital and private equity groups. Net operating income was $30
million. Other key indicators are listed above.
Balance sheet
Cash
Other current assets
Long term assets, net
Total assets
Noninterest bearing short term debt
Short term debt (10%)
Senior long-term debt
Subordinated debt
Equity
Total Liabilities & Equity
($ millions)
50
100
120
270
60
10
0
0
200
270
Interest Coverage
Net Operating Income
Interest Expense
- Short term debt
- Senior long term debt
- Subordinated debt
Total
NOI/Interest expense
Effective tax rate
Depreciation
30
1
0
0
1
30
30%
$20 million
FIN 7900, Mergers and Acquisitions – Problem Set Page 3
Flexics shares were expected to be (based on information of similar companies) trading at a P/E
of 10.6 on earnings of $2.26 per share. Based on past performance the company was expected to
generate free cash flows of $2.57 per share next year, an increase of 3.6% from the current level
of $2.48. The Treasury bond yield was 4.5%, the company’s beta, based on comparable companies,
was about 1.3 and the long run market return was 11.5%.
A. What is the total number of shares in Flexics currently? How many shares does the CEO
own? [5 points]
B. Based on the Balance Sheet values (shareholder’s equity), what is the book-value of each
share? [5 points]
C. What was the value of the entire company Flexics based on the recent private placement?
[5 points]
D. What is the Enterprise Value (EV) of Flexics at current market prices?[5 points]
E. Create a basic income statement (starting from operating income to net income). [5 points]
F. At the current price levels, how much cash can the CEO generate by selling all his shares?
[10 points]
G. Consider a scenario that Flexics raises debt to the tune of $20 million as senior debt from
Bank of America, at 12% interest, create a basic income statement (showing increased
interest payments, changes to net income, etc.). Will the net income be positive of negative
for this hypothetical scenario? [15 points]
H. Consider another scenario where in addition to the senior debt from BofA, Flexics also
raises debt of $10 million at 15% from Seattle partners. Create a basic income statement
(showing increased interest payments, changes to net income, etc.). Will the net income be
positive or negative for this hypothetical scenario? [20 points]
I. What is the most amount of debt (given the information given above regarding conditions
of generating debt), can the CEO of Flexics raise for an LBO? [20 points]

Ryan and Robin met at Rockhurst university and after graduation in 2020; they decided to form a business to market American flags, “buy American” bumper stickers, and other similar merchandise. The merchandise would be manufactured in China and sold initially only in Missouri. Ryan wants to operate the business as a partnership; while Robin wants to organize the business as a regular C corporation. Limit your answers for the first two question to these two business forms (3 points each)

a) Explain Ryan’s position. Be specific.

b) Explain Robin’s position

They have decided initially to do business only in Missouri. Their medium range plan (in the next 5 years) is to do business in 30 American states. Their long-term plan (in the next 20 years) is to be a multinational public firm with shareholders all over the world.

1. What business form do you recommend for the short term? Why?

2. What business form do you recommend for the medium term? Why?