Lynn Price recently completed her MBA and accepted a job with an electronics manufacturing company. Although she likes her job, she is also looking forward to retiring one day. To ensure that her retirement is comfortable, Lynn intends to invest $3,000 of her salary into a tax-sheltered retirement fund at the end of each year. Lynn is not certain what rate of return this investment will earn each year, but she expects each year’s rate of return could be modeled appropriately as a normally distributed random variable with a mean of 12.5% and standard deviation of 2%. (this problem requires the use of Analytic Solver Platform)

If Lynn is 30 years old, how much money should she expect to have in her retirement fund (expected value) at age 60? Answer this question by using the appropriate Psi Statistical function

What is the probability that Lynn will have more than $1 million in her retirement fund when she reaches age 60? Answer this question by using the appropriate Psi Statistical function

Attach the screenshots of your spreadsheet model and the distribution graph for the fund she will have at age 60

XYZ Company is a reputable manufacturer of various especially electronic items. Jay Carter, a recent MBA graduate, has been hired by the company in its finance department. On of the major revenue-producing items manufactured by the XYZ is smartphone. The company currently has one smartphone in the market and sells has been excellent. The smartphone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with newer models. The company can manufacture the new smartphone for $300 each in variable costs. Fixed costs for the operation are estimated to run $5.1 million per year. The estimated sales volume is 64,000, 106,000, 87,000, 78,000, and 54,000 unit per year for the next five years, respectively. The unit price of the new smartphone will be $485. The necessary equipment can be purchased for $31 million and will be depreciated on a seven-year MACRS schedule (Use Table A-1 below). It is believed the value of the equipment in five years will be $5.5 million. Net working capital for the smartphones will be one time at $5,000,000 at the beginning of the project (time zero). XYZ has a 35% corporate tax rate and required return of 12%. Jay was asked to prepare a report that answer the following questions: Part 1- (40 Points) 1. What is the project NPV? 2. What is the Project IRR? 3. What is the payback period of the project? 4. What is profitability index of the project? 5. How sensitive is the NPV to change in the price of the new smartphone (assume that the price goes done to $370)? 6. How sensitive is the NPV to change in the quantity sold (assume that quantity reduce by 10%)? Part 2- (25 Points) 1. What is a break-even (quantity)? 2. If the total interest payment be $150,000, what are the degrees of operating and financial leverage? Part 3- (25 Points) Assume that the company has the following capital structure: Debt $15,000,000 Preferred stock $7,5,000,000 Common stock $27,5,000,000 What will be the cost of capital if the company decide to raise the needed capital proportionally and with following costs? Please use the following information to calculate the weighted cost of capital: a. Bond: A 30-year bond with a face value of $1000 and coupon interest rate of 13% and floatation cost of $20 (Tax is 35%) b. Preferred stock: Face value of $35 that pays dividend $5 and floatation cost of $2 c. Common stock: Market value of $54 with floatation cost of $3.5. Last dividend was $6. The dividend will expect to grow at 7%. Part 4 (10 Points) Uses the new cost of capital, calculate the NPV and IRR?

XYZ Company is a reputable manufacturer of various especially electronic items. Jay Carter, a recent MBA graduate, has been hired by the company in its finance department.

On of the major revenue-producing items manufactured by the XYZ is smartphone. The company currently has one smartphone in the market and sells has been excellent. The smartphone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with newer models.

The company can manufacture the new smartphone for $300 each in variable costs. Fixed costs for the operation are estimated to run $5.1 million per year. The estimated sales volume is 64,000, 106,000, 87,000, 78,000, and 54,000 unit per year for the next five years, respectively.

The unit price of the new smartphone will be $485. The necessary equipment can be purchased for $31 million and will be depreciated on a seven-year MACRS schedule (Use Table A-1 below). It is believed the value of the equipment in five years will be $5.5 million.

Net working capital for the smartphones will be one time at $5,000,000 at the beginning of the project (time zero). XYZ has a 35% corporate tax rate and required return of 12%.

Jay was asked to prepare a report that answer the following questions:

1. What is the project NPV?
2. What is the Project IRR?
3. What is the payback period of the project?
4. What is profitability index of the project?
5. How sensitive is the NPV to change in the price of the new smartphone (assume that the price goes done to $370)?
6. How sensitive is the NPV to change in the quantity sold (assume that quantity reduce by 10%)?

Part 2- (25 Points)

1. What is a break-even (quantity)?
2. If the total interest payment be $150,000, what are the degrees of operating and financial leverage?

Assume that the company has the following capital structure:

What will be the cost of capital if the company decide to raise the needed capital proportionally and with following costs? Please use the following information to calculate the weighted cost of capital:

1. Bond:

A 30-year bond with a face value of $1000 and coupon interest rate of 13% and floatation cost of $20 (Tax is 35%)

2. Preferred stock:

Face value of $35 that pays dividend $5 and floatation cost of $2

3. Common stock:

Market value of $54 with floatation cost of $3.5. Last dividend was $6. The dividend will expect to grow at 7%.

Uses the new cost of capital, calculate the NPV and IRR?

ON BOEING AND  China Eastern Airlines

Describe at least two differences in disclosure provided in the footnotes of the competitors under IFRS and US GAAP. Example:

The Property, Plant and Equipment footnote is much more detailed for Company X in IFRS than for Company Y using US GAAP. For each PP&E component, it reconciles the differences beginning and ending net book values including additions, disposals, currency translation effects, depreciation and impairments. Company Y lists the PP&E components only.

For one of the major accounting differences, do further research into the applicable standards for IFRS and for U.S. GAAP. Quote portions from each standard and then explain the standards in your own words. Where are the U.S. GAAP and IFRS standards specifically similar and different? Example:

Earnings per Share:   Under IFRS, Company X calculates dilutive potential common shares independently for each interim period presented (discrete method). Under US GAAP, Company Y computes dilutive potential common shares on a year-to-date weighted average for each interim period presented (integral method).

Upstream Eliminating Entries and Consolidated Net Income, Comprehensive Problem On January 2, 2014, Patten Company purchased a 90% interest in Sterling Company for $1,400,000. At that timeSterling Company had capital stock outstanding of $800,000 and retained earnings of $425,000. The differencebetween book value of equity acquired and the value implied by the purchase price was allocated to the follow-ing assets:

Inventory$41,667 Plant and Equipment (net) 200,000 Goodwill 88,889

The inventory was sold in 2014. The plant and equipment had a remaining useful life of 10 years onJanuary 2, 2014

During 2014 Sterling sold merchandise with a cost of $950,000 to Patten at a 20% markup above cost. AtDecember 31, 2014, Patten still had merchandise in its inventory that it purchased from Sterling for $576,000.In 2014, Sterling Company reported net income of $410,000 and declared no dividends

Required: A.Prepare in general journal form all entries necessary on the consolidated financial statements workpaper toeliminate the effects of the intercompany sales, to eliminate the investment account, and allocate the differ-ence between book value of equity acquired and the value implied by the purchase price.

B.Assume that Patten Company reports net income of $2,000,000 from its independent operations. Calculatecontrolling interest in consolidated net income.

C.Calculate noncontrolling interest in consolidated income.

Please show all your work.

Jericho Company recently acquired three businesses, recognizing goodwill in each acquisition. The acquired goodwill was allocated to the three reporting units: Apple, Banana, and Carrot. Jericho provides the following information in performing the 2012 annual review for impairment.

Required:
A: Which of Jericho's reporting units require both steps to test for goodwill impairment?
B: How much goodwill impairment should Jericho report for 2012?

It's not unusual for one company to buy another company in order to obtain technology that the acquired company has developed or is in the process of developing.

Required: Explain the accounting treatment of purchased technology.

At least 350 words

Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 years, and the shareholders are satisfied with the company’s management. Prior to founding Stephenson Real Estate, Robert was the founder and CEO of a failed alpaca farming operation. The resulting bankruptcy made him extremely averse to debt financing. As a result, the company is entirely equity financed, with 9 million shares of common stock outstanding. The stock currently trades at $37.80 per share. Stephenson is evaluating a plan to purchase a huge tract of land in the southeastern United States for $95 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson’s annual pretax earnings by $18.75 million in perpetuity. Jennifer Weyand, the company’s new CFO, has been put in charge of the project. Jennifer has determined that the company’s current cost of capital is 10.2 percent. She feels that the company would be more valuable if it included debt in its capital structure, so she is evaluating whether the company should issue debt to entirely finance the project. Based on some conversations with investment banks, she thinks that the company can issue bonds at par value with a 6 percent coupon rate. From her analysis, she also believes that a capital structure in the range of 70 percent equityy30 percent debt would be optimal. If the company goes beyond 30 percent debt, its bonds would carry a lower rating and a much higher coupon because the possibility of financial distress and the associated costs would rise sharply. Stephenson has a 40 percent corporate tax rate (state and federal). Please answer the questions below with separate papers.

1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. 2. Construct Stephenson’s market value balance sheet before it announces the purchase. Market value balance sheet Assets    Equity      Total assets    Debt and equity  

3. Suppose Stephenson decides to issue equity to finance the purchase.

a. What is the net present value of the project?

b. Construct Stephenson’s market value balance sheet after it announces that the firm will finance the purchase using equity. What would be the new price per share of the firm’s stock? How many shares will Stephenson need to issue to finance the purchase? Market value balance sheet Old assets       NPV of project   Equity      Total assets Debt and equity  

c. Construct Stephenson’s market value balance sheet after the equity issue but before the purchase has been made. How many shares of common stock does Stephenson have outstanding? What is the price per share of the firm’s stock? Market Value Balance Sheet Cash       Old assets          NPV of project   Equity      Total assets Debt and equity   d. Construct Stephenson’s market value balance sheet after the purchase has been made. Market Value Balance Sheet Old assets       PV of project      Equity      Total assets    Debt and equity  

4. Suppose Stephenson decides to issue debt to finance the purchase. a. What will the market value of the Stephenson company be if the purchase is financed with debt? b. Construct Stephenson’s market value balance sheet after both the debt issue and the land purchase. What is the price per share of the firm’s stock? Market Value Balance Sheet Value unlevered    Debt    Tax shield      Equity      Total assets    Debt and equity  

5. Which method of financing maximizes the per-share stock price of Stephenson’s equity?

Information concerning Concord Corporation’s intangible assets is as follows. 1. On January 1, 2020, Concord signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $60,000. Of this amount, $12,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $12,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the 4 annual payments discounted at 12% (the implicit rate for a loan of this type) is $36,450. The agreement also provides that 8% of the revenue from the franchise must be paid to the franchisor annually. Concord’s revenue from the franchise for 2020 was $850,000. Concord estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) 2. Concord incurred $75,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2020. Legal fees and other costs associated with registration of the patent totaled $20,000. Concord estimates that the useful life of the patent will be 8 years. 3. A trademark was purchased from Shanghai Company for $35,000 on July 1, 2017. Expenditures for successful litigation in defense of the trademark totaling $10,200 were paid on July 1, 2020. Concord estimates that the useful life of the trademark will be 20 years from the date of acquisition.

Prepare a schedule showing the intangible assets section of Concord’s balance sheet at December 31, 2020.

A model car can be purchased at a hobby store for $6. It is HO scale meaning it is 1/87 of the size of the actual van.

Plastic models of this type are made using an injection molding machine. A die is created out of special steel in the shape of the vehicle. Other molds are used for the wheels and other parts. Molten plastic, usually styrene, is pumped into the mold under pressure which forms the body of the vehicle. It is ejected from the mold, allowed to cool and then is later painted, assembled, boxed and sold. Items like this are normally sold to specialized distributors who sell to the hobby shop retailers. The hobby shop would usually pay about 50% of the retail price and the distributor would pay approx. 60% of the price the retailer paid. In selling the model, the manufacturer would typically make a gross profit of 33.3%, meaning its cost of the item is $1.20.

Assume that the cost of the die is $10,000 and it can be used to make 25,000 models before it wears out. If produced in house, the unit cost of the styrene material is $.10; the unit costs of painting each model are $.05 fixed and $.05 variable. The plastic box it is sold in costs $.15. The rest of the unit costs are split 2/3 fixed and 1/3 variable. The model can be produced in lots of 5,000 as warranted by sales demand.

A Chinese toy company has offered to supply the completed model for $.90 each plus $.15 for shipping, custom duties etc. provided the US company orders and pays for all 25,000 models at one time. If purchased from the Chinese company, no US worker would lose their job but there could be reduced overtime for the employees.

1) Describe the process the US company should use to critically evaluate whether or not to accept the offer from the Chinese company.

2) Prepare a schedule showing unit costs [fixed & variable] of the model and breakeven sales in $ and units IF the US company manufactures the model car and sells it to the distributor.