Many believe that jobs in the US have changed a great deal over time. In two time periods (1989 and 1998) adults in the US were asked about their jobs on the General Social Survey. Respondents were asked how much they agree with the following statements: my income is high; my job is secure; my opportunities for advancement are high; my job is interesting; I can work independently. Higher numerical responses reflect greater agreement with each statement (1=strongly disagree, 2=disagree, 3=neither agree or disagree, 4=agree, and 5=strongly agree). Did average agreement with seeing jobs as secure decline over time for US workers (α=0.01)?

Please distinguish between kickbacks, referral fees, commissions, contingency fees, and impermissible gifts and entertainment. Please provide a specific example of each related to accounting.

To what extent can the transmedia storytelling approach be used for marketing non entertainment products? What contextual factors would determine the applicability and effectiveness of this approach?

From the same Texas Department of Insurance data on closed claims for medical malpractice liability insurance referred to in Problem 1, we can estimate the number of claims in each year of injury that will be closed in the next 16 years. We obtain the following data. Here the estimated dollars per claim for each year have been adjusted to 2007 dollars to account for inflation, so the values are all compatible. Texas was said to have had a “medical malpractice liability crisis” starting in about 1998 and continuing until the legislature passed tort reforms effective in September 2003, which put caps on certain noneconomic damage awards. During this period premiums increased greatly and doctors left high-risk specialties such as emergency room service and delivering babies, and left high-risk geographical areas as well causing shortages in doctors in certain locations. The data from 1994 until 2001 is the following:

1. Calculate the mean or average number of claims per year for medical malpractice insurance in Texas over the four-year period 1994–1997.
2. Calculate the mean or average number of claims per year for medical malpractice insurance in Texas over the four-year period 1998–2001.
3. Calculate the mean or average dollar value per claim per year for medical malpractice insurance in Texas over the four-year period 1994–1997 (in 2009 dollars).
4. Calculate the mean or average dollar value per claim per year for medical malpractice insurance in Texas over the four-year period 1998–2001 (in 2009 dollars).
5. Looking at your results from (a) to (e), do you think there is any evidence to support the conclusion that costs were rising for insurers, justifying the rise in premiums?

In August 1998, AMP launched a hostile $3.3 Billion takeover bid for the GIO Insurance Group. The takeover took 17 months, and was finally concluded in December 1999 when AMP acquired a 100% controlling interest in GIO. Shareholders in GIO were initially offered $5.35 per share, or one AMP share for every four GIO shares. The cash offer represented (approximately) a 30% premium on the market value of GIO shares. The share exchange, based on AMP’s share price at the time (around $20) was valued at just over $5.05. Mid December 1998, an independent report by Grant Samuel and Associates commissioned by GIO, valued GIO shares at between $5.66 and $6.71. On 20 December 1998, stock brokers Ord Minnett advised GIO shareholders to accept the $5.35 offer. KPMG also stated the offer was generous (as GIO’s shares were only valued between $4.28- $4.49 without the takeover offer).

Required:

(i) List three factors that can motivate hostile takeover activity in practice.

(ii) Identify the key risks associated with hostile takeover bids for the acquirer in practice.

(iii) What actions can a target firm take to defend itself against potential hostile takeover activity?

(iv) What is the purpose of independent valuation reports in takeover activity? What are the limitations (if any) of these reports?

(v) Explain AMP’s post takeover performance in relation to GIO. What were the factors that contributed to this performance?

BIOMET VALUATION PROBLEM Three-Stage FCFE Model

Biomet Inc., designs, manufactures and markets reconstructive and trauma devices, and reported earnings per share of $0.56 in 1993, on which it paid no dividends. (It had revenues per share in 1993 of $2.91). It had capital expenditures of $0.13 per share in 1993 and depreciation in the same year of $0.08 per share. The working capital was 60% of revenues in 1993 and will remain at that level from 1994 to 1998, while earnings and revenues are expected to grow 17% a year. The earnings growth rate is expected to decline linearly over the following five years to a rate of 5% in 2003. During the high growth and transition periods, capital spending and depreciation are expected to grow at the same rate as earnings, but are expected to offset each other when the firm reaches steady state. Working capital is expected to drop from 60% of revenues during the 1994- 1998 period to 30% of revenues after 2003. The firm has no debt currently, but plans to finance 10% of its net capital investment and working capital requirements with debt.

The stock is expected to have a beta of 1.45 for the high growth period (1994-1998), and it is expected to decline to 1.10 by the time the firm goes into steady state (in 2003). The treasury bond rate is 7%. Market risk premium is 5.5%. Estimate the value per share, using the FCFE model. ASSUME YOU ARE AT THE START OF THE YEAR 1994.

PLEASE SUBMIT EXCEL SPREADSHEET WITH FORMULAS TO UNDERSTAND CALCULATIONS.

***Excel is required to solve this problem. Please use excel and show all formulas used in each cell I would really appreciate the work***

Three-Stage FCFE Model:

Biomet Inc., designs, manufactures and markets reconstructive and trauma devices, and reported earnings per share of $0.56 in 1993, on which it paid no dividends. (It had revenues per share in 1993 of $2.91). It had capital expenditures of $0.13 per share in 1993 and depreciation in the same year of $0.08 per share. The working capital was 60% of revenues in 1993 and will remain at that level from 1994 to 1998, while earnings and revenues are expected to grow 17% a year. The earnings growth rate is expected to decline linearly over the following five years to a rate of 5% in 2003. During the high growth and transition periods, capital spending and depreciation are expected to grow at the same rate as earnings, but are expected to offset each other when the firm reaches steady state. Working capital is expected to drop from 60% of revenues during the 1994- 1998 period to 30% of revenues after 2003. The firm has no debt currently, but plans to finance 10% of its net capital investment and working capital requirements with debt. The stock is expected to have a beta of 1.45 for the high growth period (1994-1998), and it is expected to decline to 1.10 by the time the firm goes into steady state (in 2003). The treasury bond rate is 7%. Market risk premium is 5.5%. Estimate the value per share, using the FCFE model. ASSUME YOU ARE AT THE START OF THE YEAR 1994.

Sony is a Japanese multinational company that decided to expand its entertainment business in the United States. Sony purchased CBS Records and Columbia Pictures to form Sony Music and Sony Pictures. Because of these acquisitions, Sony assumed debt of $1.2 billion and allocated $3.8 billion to goodwill. On Sony’s Annual Report filed with the SEC, Sony reported only two industry segments: electronics and entertainment. Although Sony Music was profitable, Sony Pictures produced continued losses of approximately $1 billion. When Sony purchased the motion pictures operations, it projected a loss for only five years because it assumed that the motion pictures entertainment would become profitable. However, Sony suffered a significant loss after amortization and the costs of financing the acquisition for the past four years.

In the current year, Sony Pictures sustained a loss of nearly $450 million, double the amount that Sony had planned. To date, Sony Pictures has had total net losses of nearly $1billion. Early in the year, Sony declared that it had written down $2.7 billion in goodwill associated with the acquisition of Sony Pictures. Sony combined the results of Sony Music and Sony Pictures and reported them as Sony Entertainment. Little profit was shown in Sony Entertainment. Sony’s consolidated financial statements did not disclose the losses from Sony Pictures.

REQUIRED

1. How should the write down of goodwill be reported? What information (if any) should be disclosed related to goodwill?

2. Since Sony has two businesses with different financial trends, should the consolidated financial statements provide specific segment disclosure information? What should the company disclose?

3. Reporting insufficient information or excluding required disclosures can be misleading or perceived as unethical. What ethical standards applicable to Sony’s reporting?

You may respond to each requirement separately, i.e. your response does not have to flow as a single paper.

NOTE: Please Support your discussion with REFERENCE to FASB Codification and reputable sources (NOT Wikipedia, Investopedia or Blogs).

Which of the following is NOT an example of a financial reward that a salesperson could receive?

a) Travel expenses

b) Salary

c) Psychological income

d) Entertainment allowance

e) Company car