Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process.

Waterways likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2019, totaled $181,800.

Direct Materials

Direct materials cost 80 cents per pound. Two pounds of direct materials are required to produce each unit.

Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2019, totaled 11,370 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2019, totaled $102,870.

Other Information

The Cash balance on December 31, 2019, totaled $100,000, but management has decided it would like to maintain a cash balance of at least $700,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.30 per share for 4,910 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 9% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $500,000 equipment purchase is planned for February.

For the first quarter of 2020, prepare a cash budget. (Round answers to 0 decimal places, e.g. 2,520.)

Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process.

Waterways likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2019, totaled $181,800.

Direct Materials

Direct materials cost 80 cents per pound. Two pounds of direct materials are required to produce each unit.

Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2019, totaled 11,380 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2019, totaled $102,875.

Other Information

The Cash balance on December 31, 2019, totaled $101,000, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.40 per share for 5,340 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 9% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $460,000 equipment purchase is planned for February.

For the first quarter of 2020, prepare a cash budget. (Round answers to 0 decimal places, e.g. 2,520.

Cool Cargo Corporation is considering going public. Managers want to estimate common stock value. Cool Cargo’s CFO has collected data for valuation using the free cash flow method as follows…

The firm’s weighted average cost of capital is 11%, and it has $1.5 million of debt at market value, and $500,000 of preferred stock also at market value. The estimated free cash flows over the next 5 years, 2017-2021, are given as follows:

Year       Estimated Free Cash Flow

2017       $200,000

2018       $250,000

2019       $310,000

2020       $350,000

2021       $390,000

After 2020, to infinity, the firm expects free cash flow to grow at a rate of 3% per year.

Estimate the value of Cool Cargo’s entire company using the free cash flow valuation model.

Use your finding in part (a), along with the data provided above, to find Cool Cargo’s common stock value.

If the firm has 200,000 shares of common stock outstanding, what is its estimated value per common share?

Cool Cargo Corporation is too small to immediately become part of the S&P 500. How are stocks weighted in the S&P 500, and how is this different from the DJIA and NASDAQ 100? Which of the three indices is most representative of the U.S. stock market?

The above Free Cash Flow estimates were based on the 2017 tax code (i.e., before the recent income tax cuts were passed). Describe how you think the new corporate and personal income tax cuts passed by the Trump Administration and Congress effective 2018 will help or hurt Cool Cargo Corporation.

Communication Case 19–2 Stock options; basic concepts; prepare a memo

You are assistant controller of Stamos & Company, a medium-size manufacturer of machine parts. On October 22, 2017, the board of directors approved a stock option plan for key executives. On January 1, 2018, a specific number of stock options were granted. The options were exercisable between January 1, 2020, and December 31, 2024, at 100% of the quoted market price at the grant date. The service period is for 2018 through 2020.

Your boss, the controller, is one of the executives to receive options. Neither he nor you have had occasion to deal with GAAP on accounting for stock options. He and you are aware of the traditional approach your company used years ago but do not know the newer method. Your boss understands how options might benefit him personally but wants to be aware also of how the options will be reported in the financial statements. He has asked you for a one-page synopsis of accounting for stock options under the fair value approach. He instructed you, “I don’t care about the effect on taxes or earnings per share—just the basics, please.”

Required:

Prepare such a report that includes the following:

1.   At what point should the compensation cost be measured? How should it be measured?

2.   How should compensation expense be measured for the stock option plan in 2018 and later?

3.   If options are forfeited because an executive resigns before vesting, what is the effect of that forfeiture of the stock options on the financial statements?

4.   If options are allowed to lapse after vesting, what is the effect on the financial statements?

Different types of cities emerge under different circumstances. For each of the following cases explain the axioms of urban economics and the economic market forces, which cause a city of a particular type to develop.

Backyard production - no cities.

Trading city.

Factory city.

Processing city

Innovation city.

Technology plays an important part in the innovation process. "Technology permits us to develop a form that provides the benefits

Research a product and by using the diagram, The New Product Concept, write an essay about how this product uses technology.

• What is the benefit?
• What is the need?
• How is the form influenced?

Entrepreneurial thinking is described as one of the most relevant skills for the 21st-century workforce (Bacigalupo, Kampylis, Punie, & Brande, 2016).There are key differences in entrepreneurial thinking which are often drawn to making decision in highly uncertain environment, pursuing opportunities, innovation and new value creation. Explain.

Benjamin Franklin created many useful inventions without any desire to receive financial reward. Is intellectual property protection needed in order to promote innovation? Is it hopeless to try to protect intellectual property in digital media? Post a thoughtful response and explain why you agree or disagree.

explore how motivation might be related to creativity within an organisation and the wider implications for organisational success.

• How encouraging of creativity are most workplaces? Please provide two (2) examples of organisations that you believe to be encouraging of creativity and why.
• What does that suggest for the firm’s approach to innovation?