On January 12, 2009, Capsule Corp. signed a $4 million contract to construct an office and warehouse for a small wholesale company. The project was originally expected to be completed in two years, but difficulties in hiring a sufficient pool of skilled workers extended the completion date by an extra year. As well, significant increases in the price of steel in the second year resulted in cost overruns on the project. Capsule Corp. was able to negotiate a partial recovery of these costs, and the total contract value was adjusted to $4.4 million in the second year. Additional information from the project is as follows:

Instructions:

a) Calculate the amount of gross profit to be recognized each year using the percentage-of-completion method. Please make sure your final answers are accurate to the nearest whole number.

b) Prepare for Capsule Corp. all the required journal entries for the year ended December 31, 2010. Please make sure your final answers are accurate to 2 decimal places. Also assume that the increase in material costs has created significant uncertainty for the contract. Hint: There are 4 Journal Entries, some journal entries may or may not require more than 2 accounts.

c) Using the zero-profit method (IFRS), determine the amount of revenue and expense to report each year. Please make sure your final answers are accurate to 2 decimal places.

d) Using the completed-contract method (ASPE), determine the amount of revenue and expense to report each year. Please make sure your final answers are accurate to 2 decimal places.

In early January 2010​, you purchased ​$34,000 worth of some​ high-grade corporate bonds. The bonds carried a coupon of 7 4/8% and mature in 2024. You paid 93.426 when you bought the bonds. Over the five years from 2010 through 2014​, the bonds were priced in the market as​ follows: Coupon payments were made on schedule throughout the​ 5-year period.

A. Find the annual holding period returns for 2010 through 2014. ​(See Chapter 5 for the HPR​ formula.)

b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the​ market? Explain.

a. The holding period return for 2010 is __​%. ​(Round to two decimal​ places.)

The holding period return for 2011 is __​%. ​(Round to two decimal​ places.)

The holding period return for 2012 is __​%. ​(Round to two decimal​ places.)

The holding period return for 2013 is __​%. ​(Round to two decimal​ places.)

The holding period return for 2014 is __​%. ​(Round to two decimal​ places.)

b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the​ market? Explain.  ​(Select the best choice​ below.)

• The market has outperformed the corporate bond investment. The average rate of return for the investment is 5.83​% versus the average market rate of 13.34​%.
• The​ high-grade corporate bond investment has outperformed the market. The average rate of return for the investment is 13.34​% versus the average market rate of 5.83​%.

Quoted Prices (% of $1,000 par value)

Year Beginning of the Year End of the Year Average Holding Period Return on High-Grade Corporate Bonds

2010 94.349 100.223 7.30%

2011 100.223 101.319 11.72%

2012 101.319 105.849 -6.89%

2013 105.849 110.776 7.90%

2014 110.776 121.592 9.11%

In early January 2010 , you purchased $27,000 worth of some high-grade corporate bonds. The bonds carried a coupon of 11 5/8% and 2024. You paid 94.349 when you bought the bonds. Over the five years from 2010 through 2014 the bonds were priced in the market as follows: LOADING...

. Coupon payments were made on schedule throughout the 5-year period.

a. Find the annual holding period returns for 2010 through 2014(See Chapter 5 for the HPR formula.)

b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain.

a. The holding period return for 2010 is %. (Round to two decimal places.)

The holding period return for 2011 is %. (Round to two decimal places.)

The holding period return for 2012 is %. (Round to two decimal places.)

The holding period return for 2013 is %. (Round to two decimal places.)

The holding period return for 2014 is %. (Round to two decimal places.)

b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain. (Select the best choice below.)

The high-grade corporate bond investment has outperformed the market. The average rate of return for the investment is 16.62 % versus the average market rate of

5.83 %.

The market has outperformed the corporate bond investment. The average rate of return for the investment is 5.83 % versus the average market rate of 16.62 %.

Click to select your answer(s).

Hershey Company is one of the world’s leading producers of chocolates, candies, and confections. The company sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hershey’s consolidated balance sheets for 2009 and 2010 follow: 2009 2010

Additional information for 2010:

Total sales $5,671.0

Costs of goods sold $3,255.8

Net income $ 509.8 2.

Compute the following ratios for 2010. Provide a brief description of what each ratio reveals about Hershey.

e. Quick f. Inventory turnover days

g. Accounts receivable turnover days

h. Accounts payable turnover days

i. Operating cycle (in days)

j. Total asset turnover

You can invest in a​ risk-free technology that requires an upfront payment of $1.13

million and will provide a perpetual annual cash flow of $115,000.

Suppose all interest rates will be either 9.7% or 4.7% in one year and remain there forever. The​ risk-neutral probability that interest rates will drop to 4.7% is 93%. The​ one-year risk-free interest rate is 8.1%​,

and​ today's rate on a​ risk-free perpetual bond is 5.5%. The rate on an equivalent perpetual bond that is repayable at any time​ (the callable annuity​rate) is 8.6%.

What is the NPV of investing​ today?

What is the NPV of waiting and investing​ tomorrow? The NPV if the rate goes up is $? The NPV if the rate goes down is $? The PV is?

Verify that the hurdle rate rule of thumb gives the correct time to invest in this case. The hurdle rule is $?

The NPV is >0 so should you invest now or wait?

Suppose a small competitive firm operates a technology that the firm’s owner knows from experience to work as follows: “Weekly output is the square root of the minimum of the number of units of capital and the number of units of labor employed that week.” Suppose that in the short run this firm must use 16 units of capital but can vary its amount of labor freely. (a) Write down a formula that describes the marginal product of labor in the short run as a function of the amount of labor used. (Be careful at the boundaries, i.e. think about the ‘corner’ cases) (b) If the wage is w = $1 and the price of output is p = $4, how much labor will the firm hire in the short run? (c) What if w = $1 and p = $10? (d) Derive an equation for the firm’s short-run demand for labor as a function of w and p.

(the other answers posted on Chegg for this question were incorrect)

You are buying a mismanaged 64-unit apartment building for $3,000,000. Rents are $800 per

unit per month and expenses are $500 per unit per month, but the property is 10% vacant. You

think you can turn the property around in three years by increasing rents $75 per year at each

unit, keeping operating expenses constant. Vacancy will decrease to 7.5% in year 2 and 5% in

year 3.

The bank requires you put 25% down. Terms include a 25-year amortization at 4.0%.

You can sell the property for $3,500,000 at the end of year 3. There is a 3% prepayment

penalty.

You have a second investment opportunity to invest in a new technology that as a preferred

investor would generate a 30% return on your money.

Should you make this real estate investment or invest in the tech opportunity? (20 pts)

9. You are buying a mismanaged 64-unit apartment building for $3,000,000.  Rents are $800 per unit per month and expenses are $500 per unit per month, but the property is 10% vacant. You think you can turn the property around in three years by increasing rents $75 per year at each unit, keeping operating expenses constant.  Vacancy will decrease to 7.5% in year 2 and 5% in year 3.   

The bank requires you put 25% down. Terms include a 25-year amortization at 4.0%.   You can sell the property for $3,500,000 at the end of year 3.  There is a 3% prepayment penalty.   

You have a second investment opportunity to invest in a new technology that as a preferred investor would generate a 30% return on your money.   

Should you make this real estate investment or invest in the tech opportunity?

Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm projects growth of 20% per year for 4 years. By then, other firms will have copycat technology, competition will drive down profit margins, and the sustainable growth rate will fall to 5%. The most recent annual dividend was DIV0 = $1 per share.

Compute the value of Better Mousetraps for assumed sustainable growth rates of 6% through 9%, in increments of .5% and compute the percentage change in the value of the firm for each 1 percentage point increase in the assumed final growth rate, g. (Do not round intermediate calculations. Round your answers to 2 decimal places.)