The town of Cypress Creek is preparing to go to war against the American government. To do this, it is building a giant satellite laser! To build the laser, the government of the town will resort to taxation to fund its expenditure. The initial economy of Cypress Creek can be expressed by the following agents:

Consumers, C = 25 + 0.95(Y-T)

Output, Y = 5000

Government expenditures, G = 2000

Taxation, T = 2000

Investors, I = 750-125r

Markets are fully competitive and the equilibrium condition for markets are:

Goods and service market: Y =C + I + G

Financial market: I = S

When it builds the Satellite, government and taxation change to

Government expenditures, G = 4000

Taxation, T = 4000

Hank Scorpio, the towns' founder, announces that "even by increasing government spending and

taxation, we are not worst off, as production has not changed!"

i) [2 points] check to make sure output does not change.

j) [2 points] find the consumption level in both scenario's (low and high government spending)

k)[3 points] who is paying for the burden of taxation? (how is this new spending/taxation being

distributed between investors and consumers)

l)[2 points] as the government increases its spending (G from 2000 to 4000) why won't output

change?

Abdul is making a map of his neighborhood. He knows the following information:

• His home, the middle school, and high school are all on the same street.
• His home, the elementary school, and his friend's house are on the same street.
• The distance between home and the middle school and between home and the elementary school is 3 miles.
• The distance between the high school and the middle school and between his friend's house and the elementary school is 6 miles.
• The angle between the elementary school, middle school, and his home is congruent to the angle between his friend's house, the high school, and his home.

What theorem can Abdul use to determine the two triangles are similar? (6 points)

Acquisitive Reorganizations

I.           A.         T Corporation is owned by four individuals A, B, C and D and their respective adjusted basis in their T stock are $19,000, $87,000, $114,000 and $25,000. T’s assets consist of the following: Cash $20,000; Inventory $200,000 (AB $140,000); Land $180,000 (AB $210,000). Pursuant to the laws of the State of New York, T is merged into P Corporation pursuant to a plan whereby each shareholder of T is to receive $75,000 of P stock and $25,000 of cash. P is a publicly traded company whose assets, net of liabilities, are valued at $25 million. What are the tax consequences of this merger to T, T’s shareholders and P?

                           1.          How would your answer to part A, above, change if each shareholder were to receive only $25,000 of P stock and $75,000 of cash?

                           2.          How would your answer to part A, above, change if each shareholder, other than D, was to receive only P stock and D was to receive $100,000 of cash?

                           3.          How would your answer to part A, above, change if each shareholder, other than D, were to receive $100,000 of cash and D was to receive only P stock?

14) Recall the film “God Grew Tired of Us”. Describe normative history-graded (or cohort) differences

between Panther, John, & Daniels’s cohort in the Sudan and the current cohort of children in the United

States. How do you think the early traumatic experiences of the “Lost Boys” will affect their beliefs,

values, and priorities about family, responsibility, and life in the future?

History of the Business In February 1978, Ahmad moved to a town with a population of 25,000 and opened a supermarket called Ahmad Supermarket. Previously, he had operated grocery stores in two other different towns. He owned and managed his first mini market store 10 years earlier at the age of 30. The supermarket was heavily involved in selling on credit, and Ahmad’s first move was to go into a strict cash sales operation – the first of its kind in the town. Ahmad’s motto was “Value for Your Money Every Day” and he emphasized on friendly, efficient service, high quality merchandise, and reasonable prices. His competitors were old line stores who did not welcome the strong competition. Several innovations helped him to get established and increase sales volume. For example, Ahmad Supermarket was the first store in the town to feature advertised weekend and holiday specials. Ahmad was also one of the first stores in that area of the state to give trading coupons. By 1998, his store had become the number one supermarket in the town. By the end of 1998, the store had also outgrown the original downtown location. A modern, 10,000-square-foot store was erected at the east edge of the town – the direction of the town’s growth. Shortly after this move, Ocean, a regional supermarket chain, opened the first real chain store in the town. This competition was of great concern to Ahmad, but he continued to follow his basic business philosophy and to operate even more efficiently. As a result, Ahmad Supermarket continued to show steady yearly growth in sales and profits. Recent Developments in Ahmad Supermarket In January 2000, Ahmad decided to sell a 30 percent interest in the business to his older brother, Ismail, and another 20 percent interest to his younger brother, Adam. Adam had recently been graduated from a local university, and he became an active partner in the business. For many years, the store had been recognized as one of the leading independent supermarket operations in the state. 2 Due to rapid economic and social developments in the area, the town’s population of 25,000 had grown to 200,000 by the year 2000. Ahmad Supermarket was located in the newest section of the growing town. Residents in the area were predominantly in the middle to high income brackets. However, there was also a substantial amount of lower income trade from customers living in the nearby villages. Ahmad affiliated with one of the nation’s largest independent wholesalers in 2000. This affiliation provided Ahmad the opportunity to use of many of the private labels as well as help to strengthen his company’s competitive edge in the local retailing industry. The wholesaler also provided advertising themes and promotions to member stores. Examples were promotions featuring china, calendars, diaries, bags, umbrellas, pens cutleries, towels, and t-shirts. These promotions served not only as good stimulants for increasing sales of the company, but also made Ahmad Supermarket more popular among the local retailers. Customers were inclined to say, “Something is always happening at Ahmad’s!” Local Market Structure in 2000 The Ocean chain store was located at the edge of the downtown section. Initially, Ocean mainly focused on selling their goods to customers in the middle to lower income brackets. However, more recently, they have also added merchandise that caters to the growing needs of the upper income customers in the area. Ocean then became one of Ahmad’s competitors. Presently, JIMAT Food Store remained as Ahmad’s major independent competitor. As a matter of fact, JIMAT was Ahmad’s strongest independent competitor since he opened his supermarket in 1978. JIMAT Food Store also moved to the east edge of the town and was still facing the problem of limited parking space. The food store’s major appeal was the credit offered to regular customers as well as goodwill which had been built up through years of quality service. However, the company’s business has slowly dwindled in recent years. The pricing structure in the retailing market could still be described as healthy. Although there were a couple of large food chain stores operating in the town, the smaller retailers 3 were still able to markup their products at reasonable prices. Though there was some competition among the existing companies, the rivalry among the retailers was not intense. Beginning of Discount Store Competition In the middle of 2001, a discount store came to the town and opened its doors to the public. With the new player came a new type of competition in the local retailing market. C-Mart Discount Center, a 20,000-square-foot operation, carried not only a complete line of nonfood items but also a wide line of grocery items such as dry groceries, fresh meats, dairy products, fresh fruits and vegetables as well as frozen foods. The store was franchised, and the owner operated two other C-Mart Discount Centers in a larger town some 25 kilometers away. When C-Mart Discount Center opened for business, they immediately dropped prices drastically, especially prices of staple items such as rice, cooking oil, and flour. They featured and offered a variety of staple items and branded products priced at 15 to 20 percent lower than the other retailing stores in the area. C-Mart Discount Center is seemingly using its food operation as a drawing card for their more profitable lines. Increasing Competition Ocean made it apparent immediately that it did not intend to be undersold by the discount store that gave no free coupons and provided no carryout service. Ocean began to offer weeklong specials to its customers. Eventually, the weeklong specials, rather than the weekend specials became one of the new rules in the local retailing business. At the same time, competition increasingly became intense among the retailers in the town. The retailers began to compete with each other by lowering their everyday items to near cost or below. K.C. Lim, owner of JIMAT Food Store, passed away in 2001, shortly after the opening of the discount store. Without wasting any time, a young successful businessman with an international chain store management experience quickly purchased the JIMAT Food Store 4 from the deceased family. The young businessman immediately eliminated both credit and free coupons and attempted to start a discount type of operation himself. He bought most of his products directly from the local producers as well as international manufacturers and sold them at discounted prices. Loss leaders became more prevalent in the local retailing industry. The Ocean chain not only met the discount prices but even tried to undersell some of its merchandise. Meanwhile, they further increased their advertising; more newspaper advertising, handbills, radio, and some television commercials. JIMAT likewise stayed in the thick of the price competition. Ahmad’s Dilemma The arrival of the discounter marked the beginning of a disturbing period for Ahmad Supermarket. The relatively calm situation that had prevailed for many years was suddenly shattered. For the past three years, Ahmad Supermarket had been experiencing declining sales of about 20 percent a year. As one might expect, Ahmad joined the group by lowering prices. Nevertheless, as he saw prices cut to profitless levels, he questioned the wisdom of such extreme competition. Part of the question was the type of store Ahmad Supermarket should try to be. He began to ask himself whether Ahmad Supermarket could survive if the company continues to project an image that distinguished it from the discounter. At times, it appears to Ahmad that price competition may be the most effective way to not only attract customers but also necessary in such a business. Alternative Strategies — Brainstorm the alternative solutions for your problem. — Choose the best three or four alternative strategies. — The alternatives must be able to resolve the problem stated. — The alternative should be an approach with a pattern of action to resolve the problem: NOT STEPS or ACTIVITIES. — Describe each alternative briefly: Half Page Each

1. Term BondCompany A issued an 8 year, $2,000,000 5% bond on Jan. 1, 2018. Interest is payable each December 31. The bond sold for $1,958,000. The issue costs were $30,000. The issue costs are merged with any discount or premium to calculate a single effective interest rate. 60% of the bonds are retired on April 1, 2021 at 101 plus accrued interest.Calculate the effective interest rate. Make all needed entries on January 1, 2018, December 31, 2018, April 1, 2021 and December 31, 2021. Include an amortization table for all years.

Consider the following pre-merger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding.

Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $16,700. Suppose Firm B agrees to a merger by an exchange of stock. If B offers one of its shares for every 2 of T's shares.

What will be the price per share of the merged firm?