Eight Track Tape Entertainment, Inc., just announced that they might not be able to make their upcoming bond coupon payment, and several Wall Street analysts have just issued a report saying the danger of the company filing for bankruptcy is higher now that it was before the company’s announcement. As a result, S&P cut their rating on these bonds from B+ to C. All else equal, which of the following is most likely to happen?
| Answer | Bond Price will: | Coupon Rate will: | YTM will: |
|---|---|---|---|
| A | Go up | Go down | Go down |
| B | Go up | Stay the same | Go down |
| C | Go down | Stay the same | Go up |
| D | Go down | Go up | Go up |
| E | Stay the same | Go down | Go up |
In: Finance
Donny and Mary decided to incorporate an entertainment and
production company to be named
Wayang Hebat Sdn Bhd. They submitted relevant documents to the
Companies Commission on
1st March 2020 and a notice of registration was issued immediately
on the next day. Upon
incorporation, all their belongings were sold to the company and
they gained substantial profit of
RM100,000. A disclosure of profits worth RM50,000 was made to the
board of directors and
was later ratified.
On the 15th February 2020, Donny entered into a contract with
Merdeka Studio for the making of
a TV drama. The contract amongst others required Merdeka Studio to
create a TV drama for
Wayang Hebat Sdn Bhd who shall later pay a sum of RM50,000 to the
former once the TV
drama is completed and aired by any television networks. Upon
receiving the TV drama on 1st
April 2020, Wayang Hebat Sdn Bhd sold it to a well-known television
station and was aired
twice since then. To date, Merdeka Studio has yet to receive any
payment from Wayang Hebat
Sdn Bhd. When asked for the payment, Wayang Hebat Sdn Bhd refused
to be bound by the
contract on the grounds that no approval was given to Donny to
enter into such a contract on the
company’s behalf.
Based on the above given situations, advise Wayang Hebat Sdn Bhd on
the following matters:
a) The sale by Donny and Mary of their belongings to Wayang Hebat
Sdn Bhd
b) The contract with Merdeka Studio.
In: Accounting
Witten Entertainment is considering buying a machine that costs $555,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The company can lease the machine with year-end payments of $130,000. The company can issue bonds at an interest rate of 6 percent. The corporate tax rate is 25 percent. What is the NAL of the lease? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
In: Finance
Witten Entertainment is considering buying a machine that costs $555,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The company can lease the machine with year-end payments of $130,000. The company can issue bonds at an interest rate of 6 percent. The corporate tax rate is 25 percent. What is the NAL of the lease? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
In: Finance
At carnivals and entertainment parks, there is a popular game of horse-racing. Each player has a movable horse on the display whose number corresponds to his or her alley number. The game consists of rolling a ball up an alley, where it can land in one of 15 holes. The holes are colored according to the graphic in the margin. If your ball lands in a red hole, your horse advances one space. If it lands in yellow, your horse advances two spaces, and if it lands in green, your horse gallops ahead three spaces. After your ball goes in the hole, it returns to you for your next roll. The first horse that moves 12 spaces is the winner, and the jockey, the person rolling the ball, receives a stuffed animal as a prize. One customer is at the game, bragging that he always wins after eight rolls. You look over the game and estimate that you have a 40% chance of getting the ball in a red hole, a 30% chance of getting it in a yellow hole, and a 20% chance of getting it in a green hole. There is also a 10% chance that you miss the holes, and your ball returns to you without advancing the horse. Based on your estimates of the probabilities, is it worthwhile to play the game against the bragging customer? What is the chance you will win by the eighth roll? EXCEL SHEET formulas!
In: Statistics and Probability
1. Sharks Ltd operates in the entertainment industry and one of its activities is to promote entertainment events throughout East Malaysia. The company is examining the viability of a fund-raising concert in Sabah. Estimated fixed costs are RM180,000. These include the fees paid to performers, the hire of the venue and advertising costs. Variable costs consist of the cost of a pre-packed buffet which will be provided by a firm of caterers at a price, which is currently being negotiated, but it is likely to be in the region of RM10 per ticket sold. The proposed price for the sale of a ticket is RM30. The management of Sharks Ltd has requested the following information: -
a. The number of tickets that must be sold to breakeven.?
b. How many tickets must be sold to earn RM60,000 target profit?
c.What profit would result if 10,000 tickets were sold?
d. What selling price would have to be charged to give a profit of RM60,000 on sales of 10,000 tickets, fixed costs of RM180,000 and variable costs of RM10 per ticket?
e. What is the profit-volume ratio?
f.With reference to part (a), what is the margin of safety given expected sales of 10,000 tickets?
g. Discuss ONE (1)advantage of managers possessing knowledge of the cost-volume-profit analysis.
2. Wee Ltd, produces a single product in one of its factory. For control and measurement purposes, a standard costing system was recently introduced and is now in operation.
The standards set for the month of July were as follows:
Production and sales 16,000 units
Selling price (per unit) RM140
Materials:
Material XX 6 kgs per unit at RM12.25 per kilogramme
Material YY 3 kgs per unit at RM3.20 per kilogramme
Manpower 4.5 hours per unit at RM8.40 per hour
Fixed overheads are at RM86,400 per month.
The actual data for the month of July are as follows:
- Produced 15,400 units, which were sold at RM138.25 each.
- Materials :Used 98,560 kgs of material XX at a total cost of RM1,256,640.
:Used 42,350 kgs of material YY at a total cost of RM132,979.
-
Labour
:Paid an actual rate of RM8.65 per hour to the labour force. The
total
amount paid out amounted to RM612,766.
- Fixed overheads costs RM96,840.
Required:
(a) Calculate the actual and budgeted profits for the month of July based on the marginal costing system.
(b) Calculate the following variances: -
Material price and usage variances;
Labour rate and efficiency variances;
Fixed overhead expenditure variance; and
Sales margin price and volume variances.
(c) Prepare a statement reconciling the actual with the budgeted profit or loss figure based on your answers in (b) above.
(d) Referring to part (b), how would
you explain the possible reasons for the variances?
3. BeBright Co., a wholesaler, sells its products to retailers throughout Kuala Lumpur. The company has adopted a regional structure with each region consisting of 2 sales territories. Each region has its own regional office and a warehouse which distributes the goods directly to the customer. Each sales territory also has an office where the sales and marketing staffs are located. In the Cheras region as well there are 2 sales territories with offices located in Connaught Gardens and Midah Gardens. The budgeted results for the next 3 months are as follows: -
Connaught
Midah
Total
(RM000s)
(RM000s)
(RM000s)
Cost of goods
sold
1,600
1,000
2,600
Marketing / salespersons’ salaries 300 240 540
Sales office rent 150 120 270
Depreciation of sales office equipment 50 40 90
Allocation of warehouse rent 48 24 72
Depreciation of warehouse equipment 38 22 60
Regional &headquarter’s costs:
Avoidable
costs
272
186
458
Unavoidable
costs
760
340
1,100
Total costs assigned to each
location
3,218
1,972
5,190
Reported profit /
(loss)
382
(272)
110
Sales
3,600
1,700
5,300
The company is evaluating whether it should discontinue Midah Gardens sales office as it is not profitable. Assuming that the above results are likely to be typical of future quarterly performance, should the company discontinue this sales territory?
Required:
a. State which of the above costs are relevant and irrelevant. Why?
b. Analyse the relevant costs related to keeping or discontinuing the Midah Gardens sales office. What should the company do (keep or discontinue Midah Gardens)?
c. What are TWO (2) qualitative factors that the company should consider in making its final decision?
4. A Co. and B Co. are competitors in a particular manufacturing sector. An extract of financial statements for each company is as follows: Use them in a ratio analysis that compares the companys’ financial leverage and profitability.
Item A Co. B Co.
Total assets RM10,000,000 RM10,000,000
Total equity (all common) 9,000,000 5,000,000
Total debt 1,000,000 5,000,000
Annual interest 100,000 500,000
Total sales 25,000,000 25,000,000
EBIT 6,250,000 6,250,000
Earnings available for
common stockholders 3,690,000 3,450,000
Required:
Calculate the following debt and coverage ratios for the two companies. Discuss briefly their financial risk and ability to cover the costs in relation to each other.
a. Debt ratio.
b. Times interest earned ratio.
c. Calculate the following profitability ratios for the two companies. Discuss briefly their profitability relative to each other.
d. Operating profit margin.
e. Net profit margin.
f. Return on total assets.
g. Return on common equity.
h. In what way has the larger debt of B Co. made it more profitable than A Co.? What are the risks that B Co.’s investors undertake when they choose to purchase its stock instead of A Co.’s?
i. “While ratio analysis can provide some useful information concerning a company’s operations and financial condition, it does have limitations”. Discuss briefly.
In: Accounting
1. An entertainment company is in the planning stages of producing a new computer-animated movie for national release, so they need to determine the production time (in labor-hours) necessary to produce the movie. The mean production time for a random sample of big-screen computer animated movies is x ¯ =53,550 labor-hours. Suppose we also know that for all big-screen animated movies there is a population standard deviation of σ =7,462.
a) What is the 90% confidence interval if the sample size is n=40 movies?
b) What is the 95% confidence interval if the sample size is n=40 movies?
c) What is the 95% confidence interval if the sample size is n=100 movies?
d) What is the 80% confidence interval if the sample size is n=100 movies? (Hint: You will need to use the normal table or Statcrunch to find the -z and z values that correspond to the middle 80% of the normal distribution.)
In: Statistics and Probability
On December 31, 2018, the accounts in the ledger of Monroe Entertainment Co. are listed below. All accounts have normal balances. At the beginning of the year, retained earning beginning balance is $3,000.
|
Cash |
$ 16,000 |
|
Accounts Receivable |
6,000 |
|
Equipment |
12,000 |
|
Accumulated Depreciation- Equipment |
(6,000) |
|
Other Assets |
1,000 |
|
Accounts Payable |
1,800 |
|
Long-term Note Payable |
10,000 |
|
Common Stock |
1,000 |
|
Sales |
50,000 |
|
Cost of Goods sold |
21,000 |
|
Selling Salaries Expense |
3,000 |
|
Administration Wages Expense |
6,000 |
|
Depreciation Expense (Office Equipment) |
5,000 |
|
Interest Expense |
800 |
|
Dividends |
$ 1,000 |
1. Generate the Multi-Step Income Statement below
2. Generate Retained Earning Statement
3. Generate Balance Sheet
In: Accounting
Jennifer is the owner of a video game and entertainment software retail store. She is currently planning to retire in 30 years and wishes to withdraw $11,000/month for 20 years from her retirement account starting at that time. How much must she contribute each month for 30 years into a retirement account earning interest at the rate of 2%/year compounded monthly to meet her retirement goal? (Round your answer to the nearest cent.)
$________
In: Advanced Math
iHeartRadio is a streaming entertainment service that lets you listen to music, radio, and podcasts on different devices. It has three plans or options, starting with a free service up to an all-access service at $9.99 per month. From iHeartRadio’s perspective, the difference in the cost of service provision between each plan or option seems to be basically the same (it streams content to your device and automated software handles the different features between plans). How do you explain the variety of prices for virtually the same service, given that the cost to iHeartRadio of providing each plan is basically the same?
Select one:
a. iHeartRadio is making the common mistake of trying to maximize its profit margin instead of its total profit. Maximizing profit margin always results in a lower quantity supplied than maximizing total profit,and selling different plans will result in a lower quantity for each plan than if iHeartRadio sold a high quantity of a single service.
b. Price discrimination between demanders. High demanders are willing to pay a high price for a plan that includes playing songs on demand and listening offline. Low demanders aren't, and are only willing to pay a low price for a relatively smaller number of options.
c. The prices are different because it is more costly for iHeartRadio to set limits on what it allows to stream to individual devices under its free plan, and it is cheaper for iHeartRadio to just let all of its content stream under its all-access plan. The price difference is due to the cost difference.
d. Price discrimination between demanders. Buyers of the low-priced plan are high demanders since they are spreading out their demand for entertainment over fewer stations and options, so they value each single station or option relatively highly. Buyers of the more expensive plan are low demanders since they spread their entertainment demand over a large number of stations and options, and thus do not value each single station or option very highly.
In: Economics