The Egyptian Pound (EGP) went through some volatility since it was floated in November 2016 until today. This could be broken down in 4 main phases as follows:

Phase 1: From floatation till June 2018

Phase 2: From June 2018 – December 2018

Phase 3: From January 2019 – February 2020

Phase 4: Coronavirus worldwide outbreak

Required:

1. Analyze what happened during each of the above 4 phases and explain in full details how these factors impacted the EGP exchange rate versus the Dollar.

• What made the EGP appreciate / depreciate. Your analysis should be based on how the BOP components impacted the exchange rate.
• What actions (if any) were taken by the Central Bank of Egypt in response to these market changes. What was the intended outcome which made CBE take such actions?
• What major actions related to interest rates on EGP saving instruments were taken by the largest public sector banks (National Bank of Egypt and Banque Misr). Why do you think these actions were taken?

2. What do you think will happen to the EGP exchange rate against the Dollar by end of 2020? (EGP will appreciate / Depreciate or remain the same at the current level of US$ / EGP 15.7). Justify your expectation based on the BOP components analysis.

3. A company has calculated their point price elasticity of demand to be -0.8 when they sell 6,000 units a month at a price of $120 per unit.

3. (a) The CEO is planning to implement an aggressive price cut in order to increase the quantity sold and, therefore, the revenue of the company. What would be your feedback on such plan? Justify your answer using the economic intuition behind the concept of price elasticity of demand.

(b) What is the expected percentage change in the monthly quantity of units sold if the company raises the price by 30%? How many monthly units do they expect to sell after this change in price? Calculate price elasticity of demand at the new price and quantity.

(c) What should be the price in order to sell 7,200 units?

(d) The production manager informs the CEO of the company they just discovered a new and cheaper way to produce the good they sell. His advice is to double production because the new procedure halves the cost per unit, so costs will remain unchanged. Should the recommendation be followed? Relate your answer to the concept of elasticity.

Sky Fly, Inc is a fast growing drone manufacturer. The annual rate of return of Sky Fly's stock has been 20% over the past few years. Company managers believe 20% is a good estimate for the firms' cost of capital. Sky Fly's CEO, Dane Cooper, believes the company needs to continue to invest in projects that offer the highest possible returns. Currently, the company is reviewing two separate projects. Project E involves expanding production capacity. Project I involves introducing one of the firms' drones into a new market. The following table shows the projected cash flows for each project.

Discuss

-Calculate the NPV, IRR, and PI for both projects.

-Rank the projects based on their NPV, IRR, and PI.

-The firm can only afford to take on one investment.

-Which project will the CEO likely favor?

-What do you think the company should do?

Explain your answers.

Sky Fly, Inc is a fast growing drone manufacturer. The annual rate of return of Sky Fly's stock has been 20% over the past few years. Company managers believe 20% is a good estimate for the firms' cost of capital. Sky Fly's CEO, Dane Cooper, believes the company needs to continue to invest in projects that offer the highest possible returns. Currently, the company is reviewing two separate projects. Project E involves expanding production capacity. Project I involves introducing one of the firms' drones into a new market. The following table shows the projected cash flows for each project.

Discuss

Calculate the NPV, IRR, and PI for both projects.

Rank the projects based on their NPV, IRR, and PI.

The firm can only afford to take on one investment.

Which project will the CEO likely favor?

What do you think the company should do?

Explain your answers.

Consider

Sky Fly, Inc is a fast growing drone manufacturer. The annual rate of return of Sky Fly's stock has been 20% over the past few years. Company managers believe 20% is a good estimate for the firms' cost of capital. Sky Fly's CEO, Dane Cooper, believes the company needs to continue to invest in projects that offer the highest possible returns. Currently, the company is reviewing two separate projects. Project E involves expanding production capacity. Project I involves introducing one of the firms' drones into a new market. The following table shows the projected cash flows for each project.

Discuss

• Calculate the NPV, IRR, and PI for both projects.
• Rank the projects based on their NPV, IRR, and PI.
• The firm can only afford to take on one investment.
  • Which project will the CEO likely favor?
  • What do you think the company should do?

Explain your answers.

Morris Company has the following capital structure: Common stock, $2 par, 100,000 shares issued and outstanding

On October 1, 2020, the company declared a 5% common stock dividend when the market price of the common stock was $10 per share. The stock dividend will be distributed on October 15, 2020, to stockholders on record on October 10, 2020.

Upon declaration of the stock dividend, Norris Company would record:

Culver Company issues 8,900 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2020. The stock has a fair value of $445,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2024. The par value of the stock is $10. At December 31, 2020, the fair value of the stock is $363,000.

(a) Prepare the journal entries to record the restricted stock on January 1, 2020 (the date of grant), and December 31, 2021.

(b) On July 25, 2024, Tokar leaves the company. Prepare the journal entry to account for this forfeiture.

Instruction for students:

Assume that you are the plant manager for Brice Company. The company is plan to implement a bonus system for purchasing and production managers that provides an annual 10 percent bonus for favorable direct materials variances (MPV and MQV).

Required:

Write a report for the CEO in which you explain the primary assumptions and considerations used in making your recommendation.

1. In your opinion, does having a favorable variances is better than unfavorable? In other words, does achieving favorable variances means that managers in charge have to be rewarded? Conversely, does unfavorable variances always reflect a poor performance by the manager in charge?
2. Explain the potential benefits associated with the new bonus system.
3. Elaborate the potential costs associated with the new bonus system.
4. Identify the potential ethical concerns on the new bonus system.
5. Finally, provide the CEO with a recommendation on whether to adopt or not to adopt the new bonus system.

21. Finlandia Frankfurters (FF), incorporated in Finland, uses variable costing for external reporting. On 1st January, it is purchased by Belgian Bagels, which uses absorption costing, and FF is obliged to adopt the parent company's accounting method for the purposes of filing consolidated accounts. At the time of the merger, FF had 4,000 units in inventory and production costs remained stable over the following year. Which is true about FF's income in the first post-merger year? A. If sales are 10,000 units and production 12,000 units, variable costing income (VCI) exceeds full costing income (FCI) B. If sales are 10,000 units and production 10,000 units, FCI exceeds VCI C. If sales are 10,000 units and production 8,000 units, VCI exceeds FCI D. If sales are 12,000 units and production 10,000 units, FCI exceeds VCI E. Unable to determine.