Ron (45) and Sue (45) are married. Their sons, Kyle (18) and Keith (14), lived with them all year, and the boys received more than 50% of their support from their parents. Ron’s wages were $52,000; Sue’s wages were $38,750; Kyle’s gross income was $7,200; Keith’s was $350.

Do ron and sue meet the qualifications for claiming the child tax credit/additional child tax credit or the credit for other dependents? choose the best answer:

a) ron and sue may claim both the child tax credit and the credit for other dependents

b) ron and sue may only claim the credit for other dependents

c) ron and sue may only claim the child tax credit

please I want new answer Do not copy from anyone here

Learning Outcomes:

1. Identify the different elements and issues of organizations development and creating the need for change.

2. Analyze the strategic role of change in the organization and its impact on organizational performance

Overcoming barriers to change: A Corus case study

Overview of the Case:

Corus was formed in 1999 when the former British Steel plc merged with the Dutch company, Hoogovens. Corus is now a subsidiary of the Indian-owned Tata Group. Corus has three operating divisions and employs 40,000 people worldwide. Corus Strip Products UK (CSP UK) is based at Port Talbot and Llanwern, Newport in South Wales. CSP UK makes steel in strip form. This is used in markets such as vehicle manufacture, construction, electrical appliances, tubes and packaging. Corus aims to be a leader in the steel industry by providing better products, higher quality customer service and better value for money than its rivals. In 2005 CSP UK introduced a cultural plan for change called 'The Journey'. The company wanted to address a wide range of business challenges, but the common theme was the fundamental way that people at all levels went about their work. The Journey focused on the values and beliefs of its people. Vitally, this was not limited to employees, but it included contractors, suppliers and other partners. This community of people together redefined eight core values. These provided the guiding principles by which Corus people would work. By early 2007, all employees had been provided with a booklet outlining the CSP Journey values and the behaviours the company expected them to follow. The new values encourage individuals to be accountable for their actions. For example, previously, there had been tragic accidents on site and other health and safety issues, such as poor driving behaviour. This needed to change. The Journey programme has taken a positive approach so that it now steers everything CSP UK does and underpins the culture of the organization.

Questions:

1. Analyze and discuss the five key elements of successful change management.

2. Explore the processes of change associated with each element.

STEPHENSON REAL ESTATE RECAPITALIZATION 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 12 million shares of common stock outstanding. The stock currently trades at $53.80 per share. Stephenson is evaluating a plan to purchase a tract of land in the southeastern United States for $49 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson’s annual pretax earnings by $11.5 million in perpetuity. Kim Weyand, the company’s new CFO, has been put in charge of the project. Kim has determined that the company’s current cost of capital is 10.5 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 coupon rate of 7 percent. Based on her analysis, she also believes that a capital structure in the range of 70 percent equity/30 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 21 percent corporate tax rate (state and federal).

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.

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?

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?

d.Construct Stephenson’s market value balance sheet after the purchase has been made.

4.Suppose Stephenson decides to issue debt to finance the purchase.

a.What will the market value of Stephenson 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?

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

S&S Air was founded 10 years ago by friends Mark Sexton and Todd Story. The company has
manufactured and sold light airplanes over this period, and the company’s products have received high reviews
for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and
fly their own airplanes. The company has two models, the birdie, which sells for US$53, 000, and the Eagle,
which sells for US$78, 000. While the company manufactures aircraft, its operations are different from
commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the company is
able to complete the manufacture of an airplane in only five weeks.
The company also receives a deposit on each order, as well as another partial payment before the order is
complete. In contrast, a commercial airplane may take one and one-half to two years to manufacture once the
order is placed. Mark and Todd have provided the following financial statements. They have also gathered the
industry ratios for the light airplane manufacturing industry.

S&S Air Inc. Income Statement for the year ended 31st December 2016
(GHC)
Sales 15,444,000
Cost of goods sold 10,884,000
Other expenses 1,845,600
Depreciation 504,000
EBIT 2,210,400
Interest 277,800
Taxable income 1,932,600
Taxes (40%) 773,040
Net income 1,159,560
Dividends 347,868
Add. To retained earnings 811,692

S&S Air Inc. Statement of Financial Position as at 31st December 2016
GHC
ASSETS
Non-current assets
Net plant and equipment 8,673,600
8,673,600

Current assets
Inventory 566,400
Accounts receivable 505,200
Cash 280,800
1,352,400
TOTAL ASSETS 10,026,000

EQUITY AND LIABILITIES
Shareholder equity
Common stock 120,000
Retained earnings 4,988,400
Total equity 5,108,400

Non-current liabilities
Long-term debt 3,114,000
Total non-current liabilities 3,114,000

Current liabilities
Accounts payable 596,400
Notes payable 1,207,200
Total current liabilities 1,803,600
Total liabilities 4,917,600
TOTAL EQUITY AND LIABILITIES 10,026,000

Light Airplane Industry Ratios
                                 Lower quartile   Median       Upper quartile
Current ratio.                   0.50.           1.43               1.89
Quick ratio.                      0.21             0.38               0.62
Cash ratio.                       0.08             0.21               0.39
Total asset turnover.      0.68.            0.85.              1.38
Inventory turnover.         4.89.            6.15               10.89
Receivables turnover.    6.27.            9.82               14.11
Total debt ratio               0.44            0.52                0.61
Debt-equity ratio.           0.79            1.08                 1.56
Equity multiplier            1.79.            2.08                2.56
Times interest earned   5.18            8.06                9.83
Cash coverage ratio.      5.84.           8.43               10.27
Profit margin.                 4.05%.         6.98%.            9.87%
Return on assets.          6.05%.         10.53%           13.21%
Return on equity.           9.93%.         16.54%.          26.15%

Required
a. In view of the high reviews for safety and reliability that their products have received, would you say
that S&S Air has lower credit risk than the industry’s median?
b. Calculate ten ratios and evaluate them to support your conclusion.
c. Note that marks will be awarded for the following: introduction, mechanics and style, arguments made
and conclusion.

I. Lehman Brothers: Subprime Accounting?

Lehman Brothers Holdings Inc. was originally founded in Montgomery, Alabama, in 1850 by three brothers. The company began as a small retailer that took cotton as payment for goods. The company gradually expanded, first into trading cotton, before growing into a giant investment bank. By 2007, the company was the fourth largest investment bank in the United States, recognizing record profits of $4.2 billion. While other companies in the industry were beginning to struggle and show losses, Lehman’s CFO assured investors that the risks posed to Lehman were minimal and would have little impact on the firm’s earnings. However, behind the record profits and executive confidence were a slew of undisclosed liabilities and shaky security valuations. When the company filed for bankruptcy on September 15, 2008, it was the largest bankruptcy in history. To put the size of this collapse into perspective, when WorldCom filed for bankruptcy in 2002, it was the largest in U.S. history, with $41 billion in debt and $107 billion in assets. Lehman Brothers entered bankruptcy with a mind-boggling $618 billion of bank debt alone and hundreds of billions of additional debt, many times the amount of debt of Enron and WorldCom combined. How did such a historic company reach this situation with so little warning?

SUBPRIME LENDING

Lehman’s storied history came from humble beginnings in the cotton trade. In 1899, the company shifted its focus to bringing other companies into the stock markets. In the early 1900s, Lehman Brothers brought such giants as Sears, Roebuck and Company, as well as R.H. Macy & Company and B.F. Goodrich Co. into the public markets. The company thrived through the great depression by focusing on venture capital markets since the public equity markets were in turmoil. The firm remained primarily run by Lehman descendants until 1969. The company continued to grow and in 1984 was acquired by American Express, eventually merging with E.F. Hutton to become the financial giant Shearson Lehman Hutton. It was during the late 1980s when the company began building an aggressive leveraged finance business—a model characterized by primarily debt-based financing. The model can be highly profitable, but increases risk. In 1994, American Express divested its interest and spun off the company in an IPO as Lehman Brothers Holdings Inc. Lehman Brothers Holdings Inc. was a highly profitable company reporting quarterly profits for 55 consecutive quarters after the spinoff, up through March 2008.

However, during this profitable period, Lehman, along with other large investment banks, became involved in subprime lending. Subprime lending is characterized by banks making loans to borrowers who would not traditionally qualify for a loan. In many cases, the loans did not have any protection from declines in collateral value because they were issued without a traditional downpayment. Further, many of the borrowers had either poor credit history, or the loans were issued without any requirement for a credit history. Why would a bank do such a thing? Investor demand drove the subprime lending craze. Investors were hungry for securities that could earn higher rates of returns, so banks would bulk large numbers of loans into portfolios, break the portfolio into different levels of risk, and sell these “mortgage-backed securities” (Mortgage Backed Securities “MBSs”) to investors craving high rates of return. However, many subprime lenders provided default guarantees to investors, and some of the most risky MBS were practically unsaleable. As a result, Lehman Brothers, along with many other large investment banks, was faced with a huge amount of risk—high amounts of debt, mostly with short-term maturities, and illiquid assets with long-term maturities. When the housing market began to collapse in 2007, borrowers walked away from the loans, leaving the banks with massive foreclosure costs and holding the titles to properties with values far less than the amount of the loan.

As a result of the subprime mortgage crisis, nearly all of Lehman Brothers’s competitors showed giant losses in the first quarter of 2008, including a huge $5.1 billion loss for Citigroup. However, CFO Erin Callan reported that Lehman was well protected from the collapse and reported a profit of $489 million. The markets were thrilled, and the price of Lehman Brothers’s stock shot up nearly 50 percent. Behind the scenes, however, Lehman Brothers was also collapsing. How was it able to continue to show profits and report lower levels of leverage than its competitors? The answer was a combination of optimistic valuations and an accounting gimmick that Lehman Brothers coined “Repo 105.”

A SOLUTION: INFLATED ASSET VALUATIONS

The majority of Lehman Brothers’s assets were considered “financial inventory” held for sale, which GAAP requires to be reported at fair market value. In 2007, Lehman Brothers adopted the new FASB standard for determining fair market value. Under ASC 820, assets without observable values are considered to be Level 3 fair values. Level 3 fair values require entities to use their judgment to determine a valuation based on assumptions presumed to be used by the markets. Often, companies use a discounted cash flows approach. As the subprime mortgage crisis ballooned during 2007 and 2008, observable market activity for many of Lehman Brothers’s assets declined, leading to more judgment. Lehman Brothers made many attempts to disclose their methods, however financial markets were reluctant to accept them. David Einhorn, an investor who held short positions betting on the decline in value of Lehman Brothers stated, “Lehman does not provide enough transparency for us to even hazard a guess as to how they have accounted for these items.” Markets were clearly skeptical: By June 2008, Lehman Brothers had a total stock market value of $19.2 billion—more than 25 percent below the reported book value. However, the assets held by Lehman Brothers were so difficult—perhaps impossible—to value that, despite market skepticism and impairment losses far lower than competitors, no one, not even the bankruptcy examiner, had been willing or able to conclude that Lehman Brothers reported unreasonable valuations.

A LESS TRANSPARENT SOLUTION: REPO 105

Lehman Brothers was facing massive amounts of debt and likely realized that unless it reduced its leverage, it would fail. However, the assets were not particularly marketable, so Lehman took full advantage of short-term loans from other big companies. This is known as the repo market, short for “repurchase.” Lehman Brothers would acquire cash on a short-term basis from other companies by selling certain assets, with the understanding and agreement that it would repurchase the assets very quickly. This enabled Lehman Brothers to pay off other short-term debt that was coming due. However, because the “sales” of the assets are accompanied by an agreement to repurchase the assets, GAAP requires that these repurchase agreements be fully disclosed and accounted for as a liability.

Lehman Brothers bypassed these accounting rules by creating the Repo 105 transaction. Unlike typical repo transactions, Lehman Brothers would “sell” assets worth more than the amount of the loan—at least 105 percent of the amount of the loan, hence the name. By doing this, it was able to bypass the repurchase agreement accounting requirements and avoid recognizing the liabilities. In addition, Lehman Brothers made the nontransparent choice of failing to even disclose these agreements anywhere in the financial statements. Through these transactions, Lehman Brothers kept massive amounts of debt out of the financial statements, including more than $50 billion of debt during 2008. No wonder it looked better than its competition!

WHERE WERE THE AUDITORS?

Ernst & Young (EY) spent considerable time auditing the valuation of Lehman Brothers’s assets. EY performed walkthroughs to understand the valuation process, identify the significant classes of transactions, and document the appropriate “what could go wrongs” that could have a material effect on relevant assertions. Further, EY substantively tested the valuations for significant classes of assets. In the end, small changes in underlying assumptions could lead to valuation fluctuations many times materiality, making it nearly impossible to determine that a valuation is unreasonable. EY issued an unqualified opinion for its 2007 audit and did not find anything to indicate the valuations were unreasonable in its 2008 quarterly reviews.

EY audited Lehman Brothers for many years. It was well informed about the company’s accounting policies. In fact, lead engagement partner William Schlich informed Anton R. Valukas, the Examiner in the eventual bankruptcy proceedings, that EY had long been aware of Lehman’s Repo 105 transactions. It did not “approve” the policy but “became comfortable with the Policy for purposes of auditing financial statements.” EY indicated to the Examiner that it concurred with Lehman’s approach, although it did not have an opinion on the use of the transaction to manage the company’s reported debt. Following ASC 860 directly, it would appear that the Repo 105 transactions were accounted for as stated in the standards. However, the lack of disclosure of the transactions appeared far more questionable. In fact, the bankruptcy Examiner concluded that there was sufficient evidence to support the finding of “colorable claims” against EY for failure to meet professional standards related to the lack of disclosure.

THE AFTERMATH

Lehman’s bankruptcy filing in September 2008 triggered a period of intense volatility in the financial markets. Coupled with other economic difficulties, the Dow Jones Industrial Average experienced intra-day ranges of more than 1,000 points and extreme price declines. The components of Lehman Brothers were sold off in bankruptcy to many different companies, and many of the derivative securities owned by Lehman Brothers and other banks were deemed worthless. Lehman emerged from bankruptcy in 2012 but did not return to operations; it merely continued winding down the business. The Lehman Brothers situation is a clear demonstration that the old mantra of “too big to fail” is not universally correct.

As usually happens when companies fail, many lawsuits followed, many taking years to reach settlements. JPMorgan agreed in January 2016 to pay $1.42 billion cash to settle claims that it profited by taking advantage of its close financial relationship with Lehman Brothers—essentially receiving payment for debts just prior to Lehman’s bankruptcy filing. Several other smaller investor lawsuits were settled out of court also.

EY did not admit to any deficiencies in its audits but, nonetheless, settled two separate lawsuits in 2013 and 2015 for $99 million with investors and $10 million with the state of New York.

1. Provide us a very high-level summary of the Issues in the Case Study (Think who, what, where, and when.) (Keep it brief).

Donaghy Corporation was founded 20 years ago by its president, Jack Donaghy. The company originally began as a small order company, but has grown rapidly in recent years, in large part due to its website. Because of the wide geographical dispersion of the company’s customers, it current employs a lockbox system with collection centres in Vancouver, Calgary, Toronto and Montreal.

Liz lemon, the company’s treasurer, has been examining the current cash collection policies. On average, each lockbox centre handles $193,000 in payment each day. The company’s current policy is to invest these payments in short-term marketable securities daily at the collection centre banks. Every two weeks, the investment accounts are swept; the proceeds are wire-transferred to Donaghy’s headquarters in Winnipeg to meet the company’s payroll. The investment accounts each earn .012% per day, and the wire transfers cost .20% of the amount transferred.

Liz has been approached by the Royal Canadian Bank about the possibility of setting up a concentration baking system for Donaghy Corp. Royal Canadian will accept each of the lockbox centres daily payments via automated clearinghouse (ACH) transfers in lieu of wire transfers. The ACH-transferred funds will not be available for use for one day. Once cleared, the funds will be deposited in a short-term account, which also yield .012% per day. Each ACH transfer will cost $150. Jack Asked Liz to determine which cash management system will be the best for the company. Liz has asked you, her assistant, to answer the following questions:

1.     What is Donaghy Corporation’s total net cash flow available from the current lockbox system to meet payroll?

2.     Under the terms outlined by the bank, should the company proceed with the concentration baking system?

3.     What cost of ACH transfer would make the company indifferent between the two systems?

Webb Corporation was founded 20 years ago by its president, Bryan Webb. The company originally began as a mail-order company, but has grown rapidly in recent years, in large part due to its website. Because of the wide geographical disper- sion of the company’s customers, it currently employs a lock- box system with collection centers in San Francisco, St. Louis, Atlanta, and Boston. Holly Lennon, the company’s treasurer, has been exam- ining the current cash collection policies. On average, each lockbox center handles $193,000 in payments each day. The company’s current policy is to invest these payments in short- term marketable securities daily at the collection center banks. Every two weeks, the investment accounts are swept; the pro- ceeds are wire-transferred to Webb’s headquarters in Dallas to meet the company’s payroll. The investment accounts each earn .012 percent per day, and the wire transfers cost .20 per- cent of the amount transferred. Holly has been approached by Third National Bank, lo- cated just outside Dallas, about the possibility of setting up a concentration banking system for Webb Corp. Third National will accept each of the lockbox center’s daily payments via automated clearinghouse (ACH) transfers in lieu of wire trans- fers. The ACH-transferred funds will not be available for use for one day. Once cleared, the funds will be deposited in a short-term account, which will yield .012 percent per day. Each ACH transfer will cost $150. Bryan has asked Holly to determine which cash management system will be the best for the company. As her assistant, Holly has asked you to answer the following questions.

QUESTIONS
1.   What is Webb Corporation’s total net cash flow available from the current lockbox system to meet payroll?
2.   Under the terms outlined by Third National Bank, should the company proceed with the concentration banking system?
3.   What cost of ACH transfers would make the company indifferent between the two systems?

Sitcom Technology Case

Case Study: Cost Concept and Cost Sheet

Sitcom Technology was founded by two IIT graduates Rehan and Nixit in the year 2016 with the objective of providing IT solutions to various companies. They launched their FinTech start-up after getting funded Rs 25,00,000 by Business Ventures, one of the FinTech Angel investors. This was in the form of a loan at a 12% rate of interest.

Rehan utilized his unused two bedrooms flat in Bannerghatta, Karnataka worth Rs 60,00,000 for the office. Although he could get Rs 20,000 per month as rent for the same in the market, he rented it out to his start-up at Rs 15,000 per month and also decided to waive off the security deposit of Rs 100,0000 (going rate).

The other assets bought for their enterprise were four computers and a server (Rs. 200,000), two printers come scanner (Rs 18,000), two cordless phones & four mobiles (Rs 62,000), modem for wifi and other internet accessories (Rs 6000)and office furniture (Rs 1,70,000). After purchasing the furniture, they realized that Rs 20,000 invested in panel doors couldn’t be used. There was no return or refund for that. With no other option in hand, they sold these doors as scrap for Rs 8,000. Besides these purchases, they also invested Rs 40,000 in annual licenses for a lot of software.

Nixit picked up two of his juniors as Programmer and Visualizer come graphic designer after negotiating heavily on their hourly remuneration of 1,000 per hour on a freelancing basis. Depending on the number of hours invested in the development of a particular software/ERP/IT Solution, they were paid. In the month of April 2019, Sitcom Technology paid them Rs 84,000 for 42 hours of work put in by each one of them.

In addition to these two, a telephone operator and a data entry staff were also hired at Rs 13,000 and Rs 17,000 per month respectively. The monthly expenses of Sitcom Technology in April 2019 were:

In April 2019, Sitcom Technology received two big project orders from a leading private bank and one small programming work outsourced by a major IT company in Electronic City. The work was completed in the same month with all four of them putting in a lot of hours. The revenue generated from these three projects was Rs 4,10,000.

Question: Prepare the cost sheet for April 2019 and calculate the profit generated assuming the depreciation on fixed assets to be 10%.

NOTE- could you please provide me the solution ASAP.