1. Norman is a 70 year old retired worker. Last year he received social security payment of $20,000. To downsize, he sold his 40 year old house for $240,000 and bought a brand new apartment for $160,000. He paid $4000 to his real estate agent. He also sold some of his stock holdings and earned $15,000. He had to pay $1000 to his stockbroker as commission.

1. What was Norman’s contributions to the GDP last year?

2. Explain why/how you get your answer.

You are promised a cash flow every year forever! Next year you will receive $100. After that, the payment will grow by 1% compounded annually. There is no risk associated with the payments. You can invest and earn a risk-free rate of return of 5%. What is the present value of the perpetuity?

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)

1. 1) Acquired $1,100 cash from the issue of common stock.
2. 2) Borrowed $570 from a bank.
3. 3) Earned $750 of revenues cash.
4. 4) Paid expenses of $280.
5. 5) Paid a $80 dividend.

During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)

1. 1) Issued an additional $475 of common stock.
2. 2) Repaid $325 of its debt to the bank.
3. 3) Earned revenues of $900 cash.
4. 4) Incurred expenses of $420.
5. 5) Paid dividends of $130.

What is the amount of Packard Company's net cash flow from financing activities for Year 2?

• Net outflow of $455.

• Net outflow of $325.

• Net inflow of $345.

• Net inflow of $20.

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)

1. 1) Acquired $1,350 cash from the issue of common stock.
2. 2) Borrowed $820 from a bank.
3. 3) Earned $1,000 of revenues cash.
4. 4) Paid expenses of $330.
5. 5) Paid a $130 dividend.

During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)

1. 1) Issued an additional $725 of common stock.
2. 2) Repaid $500 of its debt to the bank.
3. 3) Earned revenues of $1,150 cash.
4. 4) Incurred expenses of $520.
5. 5) Paid dividends of $180.

What is the net cash inflow from operating activities on Packard's statement of cash flows for Year 2?

• $540

• $1,395

• $630

• $1,000

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions:

1. 1) issued stock for $76,000
2. 2) borrowed $43,000 from its bank
3. 3) provided consulting services for $75,000 cash
4. 4) paid back $33,000 of the bank loan
5. 5) paid rent expense for $18,000
6. 6) purchased equipment for $30,000 cash
7. 7) paid $4,800 dividends to stockholders
8. 8) paid employees' salaries of $39,000

What is Yowell's net income for Year 1?

Multiple Choice

• $18,000

• $57,000

• $13,200

• $34,200

Following the acquisition of Kraft during Year 8, the Philip Morris Companies released its Year 8 statement of cash flows (indirect method).

                                   PHILIP MORRIS COMPANIES, INC.

                                           Statement of Cash Flows

                              For the Year Ended December 31, Year 8 ($ millions)

Cash flows from operating activities

Net income.............................................................     $ 2,337

Add (deduct) adjustments to cash basis

Depreciation expense........................................           654

Amortization of goodwill....................................           125

Decrease in accounts receivable.......................           601

Decrease in inventories.....................................              2

Decrease in deferred taxes................................        (325)

Increase in accounts payable............................           408

Increase in accrued liabilities............................       1,041

Increase in income taxes payable......................           362

Net cash flow from operating activities.................                             $ 5,205

Cash flows from investing activities

Increase in property, plant & equipment

(before depreciation)...........................................           (980)

Increase in goodwill (before amortization).............           (783)

Decrease in investments.......................................            405

Acquisition of subsidiary—Kraft *.........................       (11,383)

Net cash used by investing activities....................                             (12,741)

Cash flows from financing activities

Decrease in short‑term debt.................................           (881)

Increase in long‑term debt....................................        9,929

Decrease in equity (repurchase) **........................         (540)

Dividends declared...............................................         (941)

Increase in dividends payable...............................              47

Net cash provided by financing activities..............                              7,614

Net increase in cash.............................................                            $      78

Instructions

Compute Philip Morris’s free cash flow for Year 8. Discuss how free cash flow impacts the company’s future earnings and financial condition.

Company X has the following information:

Inventory at end-of-year prices of $1,300,000 (2018 – base year), $1,450,000 (2019), and $1,350,000 (2020)

The price index is 105 in 2019 and 107 in 2020

Use the dollar-value LIFO method to calculate ending inventory for 2019 and 2020.

Facts:  Highcare, Inc. is a calendar year entity that began business this year. Highcare provides nursing services to cancer patients. The services it provides are both based in traditional science and holistic medicine. To support the nursing services, Highcare purchases and dispenses medical marijuana to its patients.

Also, Highcare purchases and sells a line of recreational marijuana products for its patients and their families at its facility’s store. Highcare capitalizes only the costs associated with acquiring marijuana in its inventory costs. No other costs are capitalized into inventory. For tax purposes, Highcare's inventory capitalization and COGS are properly determined.

In Highcare’s state (California), selling medical and recreational marijuana is legal. This year, Highcare’s general financial results for each of its business lines were as follows:

Highcare’s management recently learned that, although medical and recreational marijuana are legal enterprises in California, they are not under federal law because marijuana is a controlled substance within the meaning of schedule I and II of the Controlled Substances Act (21 U.S.C. ch. 13 § 801 et seq.) . It is uncertain about how to compute its federal taxable income. Specifically, Highcare is concerned that its marijuana-related deductions, which are generally allowable under Code section 162, may be prohibited by federal law.

Issue: Based on the financial data provided, what will Highcare’s taxable income be for this year?

Required: Download this template.  R1 Research List.xlsx. Do the research and upload a completed list (remember that this is not a writing assignment, simple explanations only).

Only the cost of obtaining product is included. In other words, do not review the inventory capitalization / COGS numbers. Do not address capitalization (Code sections 263(a) or 263A).

Only primary authorities (Code and applicable Regs, cases or Rulings) are to be listed. I started the list with a sample of what I want to see. My goal is to be able to review the research to see if you're headed in the right direction.

Please DO NOT provide your process or any secondary sources.

A 3-year bond carrying 3.4% annual coupon and $100-par is putable at par 1 year and 2 years from today. Calculate the value of the putable bond under the forward rate curve below.

1-year spot rate: 2.1%;

1-year spot rate 1 year from now: 2.5%;

1-year spot rate 2 years from now: 3.8%.

Assume annual compounding. Round your answer to 2 decimal places (nearest cent).

Dufner Co. issued 13-year bonds one year ago at a coupon rate of 6.5 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.4 percent, what is the current dollar price assuming a par value of $1,000?