Suppose that you are part of the Management team at Porsche. Suppose that it is the end of December 2019 and a novel coronavirus that causes a respiratory illness was identified in Wuhan City, Hubei Province, China. The illness was reported to the World Health Organization and there is heightened uncertainty around the Globe. You (as part of the management team) are reviewing Porsche’s hedging strategy for the cash flows it expects to obtain from vehicle sales in North America during the calendar year 2020. Assume that Porsche’s management entertains three scenarios:
Scenario 1 (Expected): The expected volume of North American sales in 2020 is 35,000 vehicles.
Scenario 2 (Pandemic): The low-sales scenario is 50% lower than the expected sales volume.
Scenario 3 (High Growth): The high-sales scenario is 20% higher than the expected sales volume.
Assume, in each scenario, that the average sales price per vehicle is $85,000 and that all sales are realised at the end of December 2020. All variable costs incurred by producing an additional vehicle to be sold in North America in 2020 are billed in euros (€) and amount to €55,000 per vehicle. Shipping an additional vehicle to be sold in North America in 2020 are billed in € and amount to €3,000 per vehicle.
The current spot exchange rate is (bid-ask) $1.11/€ - $1.12/€ and forward bid-ask is $1.18/€ - $1.185/€. The option premium is €0.025, and option strike price is €0.922. Your finance team made the following forecasts about the exchange rates at the end of December 2020:
• bid-ask will be $1.45/€ - $1.465/€ if the investors (and speculators) consider the euro (€) a safe haven currency during the pandemic.
• bid-ask will be $0.88/€-$0.90/€ if the investors (and speculators) consider the U.S. dollar ($) a safe haven currency during the pandemic
5. Assume that the Scenario 2 (Pandemic) took place in 2020 and the U.S. dollar became a safe haven currency during the pandemic. What are your cash flows (profits) if you did not hedge, hedged using forward contracts, and hedged using option contracts?
6. Based on the calculations in Part B, do you believe that it is a good policy to hedge Porsche’s currency exposure? Why?
In: Finance
Suppose that you are part of the Management team at Porsche. Suppose that it is the end of December 2019 and a novel coronavirus that causes a respiratory illness was identified in Wuhan City, Hubei Province, China. The illness was reported to the World Health Organization and there is heightened uncertainty around the Globe.
You (as part of the management team) are reviewing Porsche’s hedging strategy for the cash flows it expects to obtain from vehicle sales in North America during the calendar year 2020. Assume that Porsche’s management entertains three scenarios:
Scenario 1 (Expected): The expected volume of North American sales in 2020 is 35,000 vehicles.
Scenario 2 (Pandemic): The low-sales scenario is 50% lower than the expected sales volume.
Scenario 3 (High Growth): The high-sales scenario is 20% higher than the expected sales volume.
Assume, in each scenario, that the average sales price per vehicle is $85,000 and that all sales are realised at the end of December 2020. All variable costs incurred by producing an additional vehicle to be sold in North America in 2020 are billed in euros (€) and amount to €55,000 per vehicle. Shipping an additional vehicle to be sold in North America in 2020 are billed in € and amount to €3,000 per vehicle.
The current spot exchange rate is (bid-ask) $1.11/€ - $1.12/€ and forward bid-ask is $1.18/€ - $1.185/€. The option premium is 2.5% of US$ strike price, and option strike price is $1.085/€. Your finance team made the following forecasts about the exchange rates at the end of December 2020:
In: Finance
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) Skip to question [The following information applies to the questions displayed below.]
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions, and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2020 AMT exemption for reference. The Fergusons reported making the following payments during the year: State income taxes of $4,400. Federal tax withholding of $21,000. Alimony payments to John's former wife of $10,000 (divorced on 12/31/2014). Child support payments for John's child with his former wife of $4,100. $12,200 of real property taxes. Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer. $3,600 to Kid Care day care center for Samantha's care while John and Sandy worked. $14,000 interest on their home mortgage ($400,000 acquisition debt). $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car. $15,000 cash charitable contributions to qualified charities. Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.
Comprehensive Problem 8-85 Part a a. What is the Fergusons' 2020 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable? (Round your intermediate computations to the nearest whole dollar amount.)
In: Accounting
20. Big Ltd acquired all the assets and liabilities of Small Ltd on 1 July 2019. At this date, the assets and liabilities of Rod Ltd consisted of the following:
|
Carrying Amount ($) |
Fair Value($) |
|
|
Assets |
||
|
Cash |
250,000 |
600,000 |
|
Accounts receivable |
450,000 |
500,000 |
|
Land |
200,000 |
300,000 |
|
Vehicle |
100,000 |
200,000 |
|
Accumulated depreciation -Vehicle |
(20,000) |
|
|
Liabilities |
||
|
Accounts payable |
150,000 |
150,000 |
|
Loans |
200,000 |
200,000 |
|
Equity |
||
|
Share Capital –@$6 per share |
600,000 |
|
|
Reserves |
30,000 |
In exchange for these assets and liabilities, Big Ltd agreed to
1- Issue 2 Big Ltd shares for every Small Ltd Share – Big Ltd shares were considered to have a fair value of $3 per share; costs of issue were $1,500
2- Transfer a piece of Land to the former shareholders of Small Ltd – the Land was carried in the records of Big Ltd at $200,000 but was considered to have a fair value of $500,000.
3- Pay $3 per share in cash to each of the former shareholders of Small Ltd. Big Ltd incurred $5000 in costs associated with the acquisition of these net assets.
Required:
In: Accounting
Corporate Accounting:
20. Big Ltd acquired all the assets and liabilities of Small Ltd on 1 July 2019. At this date, the assets and liabilities of Rod Ltd consisted of the following:
|
Carrying Amount ($) |
Fair Value($) |
|
|
Assets |
||
|
Cash |
250,000 |
600,000 |
|
Accounts receivable |
450,000 |
500,000 |
|
Land |
200,000 |
300,000 |
|
Vehicle |
100,000 |
200,000 |
|
Accumulated depreciation -Vehicle |
(20,000) |
|
|
Liabilities |
||
|
Accounts payable |
150,000 |
150,000 |
|
Loans |
200,000 |
200,000 |
|
Equity |
||
|
Share Capital –@$6 per share |
600,000 |
|
|
Reserves |
30,000 |
In exchange for these assets and liabilities, Big Ltd agreed to
1- Issue 2 Big Ltd shares for every Small Ltd Share – Big Ltd shares were considered to have a fair value of $3 per share; costs of issue were $1,500
2- Transfer a piece of Land to the former shareholders of Small Ltd – the Land was carried in the records of Big Ltd at $200,000 but was considered to have a fair value of $500,000.
3- Pay $3 per share in cash to each of the former shareholders of Small Ltd. Big Ltd incurred $5000 in costs associated with the acquisition of these net assets.
Required:
In: Accounting
Should business schools actively promote the enrollment of women into their full-time MBA programs? If so, how should they do it? Explain
In: Operations Management
1. The Gallup organization periodically polls adults living in the U.S. about their approval or disapproval of the job the President of the U.S. is doing. At the end of President Trump’s first month in office, January 2017, his approval rating was 45%, while at the end of last month, March, 2020, his approval rating was 49%. For the purpose of this problem, suppose that the sample size was 200 in both months, that each represented a simple random sample of adults living in the U.S. at that time, and that the two samples were chosen independently of each other. Is there evidence for a real change in opinion among U.S. adults, or could this result be due just to chance?
(a) State the null hypothesis and alternative hypothesis in terms of the original problem.
Null: __________________________________________________________________________
Alternative: ____________________________________________________________________
(b) Under the null hypothesis, the difference in the percentages is expected to be ________%. The estimated standard error for this difference is ________%. (c) The two-sample z test statistic is __________.
(d) The p-value = _________%.
(e) Our conclusion is (circle one) reject the null hypothesis OR don’t reject the null hypothesis.
In: Statistics and Probability
. The Gallup organization periodically polls adults living in the U.S. about their approval or disapproval of the job the President of the U.S. is doing. At the end of President Trump’s first month in office, January 2017, his approval rating was 45%, while at the end of last month, March, 2020, his approval rating was 49%. For the purpose of this problem, suppose that the sample size was 200 in both months, that each represented a simple random sample of adults living in the U.S. at that time, and that the two samples were chosen independently of each other. Is there evidence for a real change in opinion among U.S. adults, or could this result be due just to chance?
(a) State the null hypothesis and alternative hypothesis in terms of the original problem.
Null: __________________________________________________________________________
Alternative: ____________________________________________________________________
(b) Under the null hypothesis, the difference in the percentages is expected to be ________%. The estimated standard error for this difference is ________%.
(c) The two-sample z test statistic is __________.
(d) The p-value = _________%.
(e) Our conclusion is reject the null hypothesis OR don’t reject the null hypothesis?
In: Statistics and Probability
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 |
28 |
16 |
25 |
26 |
18 |
20 |
7 |
10 |
| A: Percent for CEO |
23 |
14 |
23 |
18 |
23 |
10 |
4 |
14 |
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 5% level of significance.
Find (or estimate) the P-value.
In: Math
Whiskey Industries Ltd., a Nanaimo, British Columbia–based company, has a December 31 year end. The company’s comparative statement of financial position and its statement of income for the most recent fiscal year are presented here, along with some additional information:
| 1. | During the year, Whiskey Industries sold, for $470 cash, equipment that had an original cost of $940 and a net carrying amount of $190. | |
| 2. | Whiskey Industries borrowed an additional $7,520 by issuing notes payable in 2020. | |
| 3. | During the year, the company purchased a piece of land for a future manufacturing site for $188,000. The land was purchased with no money down and the company entered into a mortgage payable for the full amount. |
| WHISKEY INDUSTRIES LTD. Statement of Financial Position As at December 31, 2020 |
|||||
| 2020 | 2019 | ||||
| Assets | |||||
| Current assets | |||||
| Cash | $5,690 | $18,330 | |||
| Accounts receivable | 9,400 | 18,800 | |||
| Prepaid rent | 560 | 470 | |||
| Inventory | 37,600 | 28,200 | |||
| Total current assets | 53,250 | 65,800 | |||
| Manufacturing equipment | 149,460 | 94,000 | |||
| Accumulated depreciation, manufacturing equipment | (65,050 | ) | (47,000 | ) | |
| Land | 188,000 | 0 | |||
| Total assets | $325,660 | $112,800 | |||
| Liabilities and shareholders’ equity | |||||
| Current liabilities | |||||
| Accounts payable | $10,340 | $5,640 | |||
| Wages payable | 560 | 380 | |||
| Dividends payable | 440 | 280 | |||
| Total current liabilities | 11,340 | 6,300 | |||
| Mortgage payable | 188,000 | 0 | |||
| Notes payable | 43,240 | 37,600 | |||
| Common shares | 27,260 | 23,500 | |||
| Retained earnings | 55,820 | 45,400 | |||
| Total liabilities and shareholders’ equity | $325,660 | $112,800 | |||
| WHISKEY INDUSTRIES LTD. Statement of Income For the year ended December 31, 2020 |
|||
| Sales | $122,200 | ||
| Cost of goods sold | 75,200 | ||
| Gross margin | 47,000 | ||
| Expenses | |||
| Rent expense | 6,670 | ||
| Wages expense | 9,020 | ||
| Depreciation expense | 18,800 | ||
| Interest expense | 560 | ||
| Income tax expense | 490 | ||
| Gain on sale of equipment | (280) | ||
| Net income | $11,740 | ||
(a)
Using the information above, prepare the statement of cash flows for Whiskey Industries Ltd. for the year ended December 31, 2020, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
| Supplementary disclosures: | |||||
| Cash paid for interest | $ | ||||
| Cash paid for income tax | $ |
Non-cash investing and financing activities:
During the year, land with a value of $ was acquired by
signing a mortgage payable for the full amount.
In: Accounting