In: Physics
Phosphate pollution of lakes and rivers is a considerable problem. Elevated phosphate levels can cause algal blooms and rapid eutrophication of freshwater ecosystems. To protect these ecosystems several strict pollution laws were enacted. The phosphate levels in a river were measured at several randomly chosen sites downstream from a chemical plant before and after these laws were passed. The following measurements were recorded in µg/liter units.
Was there a significant decrease in phosphate levels after the laws were enacted? Assume the phosphate values are normally distributed.
|
Before |
After |
|
|
n |
10 |
12 |
|
Mean |
650 |
500 |
|
Summation of [X1 minus X-bar] square |
5,760 |
19,008 |
|
square of sample standard deviation |
640 |
1,728 |
Suppose that you mistakenly believed that the data sets were independent samples taken from two different populations: after the law was passed the samples were taken from a different river than that of the sampling before the law was passed.
Which type of t-test would now be appropriate?
[i]: Carry this test out and determine whether you would have found that phosphate levels to be significantly higher.
[ii]: Explain the cause of any differences in your results when compared to the previous problem.
In: Statistics and Probability
1. When analyzing a firm’s financial performance, should the analyst focus on the incremental after-tax profits or the incremental after-tax cash flows of the firm? Explain your reasoning!
2. Holding all else constant, how would a significant increase in interest bearing debt impact the measure of the firm’s Free Cash Flow? Explain!
3. If a firm uses an accelerated depreciation expense method (MACRS) versus straight line depreciation expense for a newly acquired asset, what would be the impact on the firm’s operating profit after taxes in the first year the asset was in use? What would be the impact on the firm’s free cash flow after taxes in the first year the asset was in use? Which method of depreciation would you recommend?
4. In 2019, the firm’s operating profit after taxes decreased significantly, however, the firm’s free cash flow increased in 2019. Assuming the firm’s depreciation expense and W/C did not change, what is a likely explanation for the set of performance measures for this firm in 2019? Based on this information, was the firm’s performance in 2019 good, bad, or unclear?
5. In 2019, the firm’s operating profit after taxes was constant, the firm’s free cash flow decreased significantly, and the firm’s EVA was constant. What is a likely explanation for the set of performance measures for this firm in 2019? Based on this information, was the firm’s performance in 2019 good, bad, or unclear?
6. What could account for the fact that the firm’s economic value added and ROIC was positive and significantly greater than their peer firm in 2019, while the firm’s abnormal stock return compared to their peer was negative in 2019?
7. In January of 2020, Ford Motor Corporation is going to announce their plans to start constructing a production facility in Kenya in the second quarter of 2020. It is expected that Ford will not begin selling cars and trucks in Kenya until the fourth quarter of 2021 (depreciation expense will not begin until the firm starts to utilize the assets in their operations). Along with the announcement to expand into Kenya, Ford announced their expectations of a very high return on invested capital from this investment opportunity. The project will be financed at the firm’s current debt to asset ratio (wd) of around 25%. What is the likely impact of this decision for Ford’s performance in fiscal year 2020? More specifically, explain your predicted impact on the following performance measures:
Operating Margin:
Operating Return on Assets:
Free Cash Flow:
Economic Value Added:
Total Shareholders’ Return:
In: Finance
On January 12, 2009, Capsule Corp. signed a $4 million contract to construct an office and warehouse for a small wholesale company. The project was originally expected to be completed in two years, but difficulties in hiring a sufficient pool of skilled workers extended the completion date by an extra year. As well, significant increases in the price of steel in the second year resulted in cost overruns on the project. Capsule Corp. was able to negotiate a partial recovery of these costs, and the total contract value was adjusted to $4.4 million in the second year. Additional information from the project is as follows:
| 2009 | 2010 | 2011 | |
| Total contract value | $4,000,000 | $4,400,000 | $4,400,000 |
| Accumulated costs to date | 1,300,000 | 2,900,000 | 4,900,000 |
| Estimated costs to complete the project | 2,800,000 | 1,700,000 | 0 |
| Customer billings to date | 1,900,000 | 2,850,000 | 4,400,000 |
| Cash collected to date | 1,900,000 | 2,850,000 | 4,400,000 |
Instructions:
a) Calculate the amount of gross profit to be recognized each year using the percentage-of-completion method. Please make sure your final answers are accurate to the nearest whole number.
| 2009 | 2010 | 2011 | |
| Gross profit (loss) for the year |
b) Prepare for Capsule Corp. all the required journal entries for the year ended December 31, 2010. Please make sure your final answers are accurate to 2 decimal places. Also assume that the increase in material costs has created significant uncertainty for the contract. Hint: There are 4 Journal Entries, some journal entries may or may not require more than 2 accounts.
c) Using the zero-profit method (IFRS), determine the amount of revenue and expense to report each year. Please make sure your final answers are accurate to 2 decimal places.
| 2009 | 2010 | 2011 | |
| Revenue | |||
| Expense |
d) Using the completed-contract method (ASPE), determine the amount of revenue and expense to report each year. Please make sure your final answers are accurate to 2 decimal places.
| 2009 | 2010 | 2011 | |
| Revenue | |||
| Expense |
In: Accounting
In early January 2010, you purchased $34,000 worth of some high-grade corporate bonds. The bonds carried a coupon of 7 4/8% and mature in 2024. You paid 93.426 when you bought the bonds. Over the five years from 2010 through 2014, the bonds were priced in the market as follows: Coupon payments were made on schedule throughout the 5-year period.
A. Find the annual holding period returns for 2010 through 2014. (See Chapter 5 for the HPR formula.)
b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain.
a. The holding period return for 2010 is __%. (Round to two decimal places.)
The holding period return for 2011 is __%. (Round to two decimal places.)
The holding period return for 2012 is __%. (Round to two decimal places.)
The holding period return for 2013 is __%. (Round to two decimal places.)
The holding period return for 2014 is __%. (Round to two decimal places.)
b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain. (Select the best choice below.)
| Quoted Prices (% of $1,000 par value) | |||
| Year | Beginning of the Year |
End of the Year |
Average Holding Period Return on High-Grade Corporate Bonds |
| 2010 | 93.426 | 100.778 | 7.30% |
| 2011 | 100.778 | 101.975 | 11.72% |
| 2012 | 101.975 | 105.931 | -6.89% |
| 2013 | 105.931 | 112.666 | 7.90% |
| 2014 | 112.666 | 124.899 | 9.11% |
In: Finance
Quoted Prices (% of $1,000 par value)
Year Beginning of the Year End of the Year Average Holding Period Return on High-Grade Corporate Bonds
2010 94.349 100.223 7.30%
2011 100.223 101.319 11.72%
2012 101.319 105.849 -6.89%
2013 105.849 110.776 7.90%
2014 110.776 121.592 9.11%
In early January 2010 , you purchased $27,000 worth of some high-grade corporate bonds. The bonds carried a coupon of 11 5/8% and 2024. You paid 94.349 when you bought the bonds. Over the five years from 2010 through 2014 the bonds were priced in the market as follows: LOADING...
. Coupon payments were made on schedule throughout the 5-year period.
a. Find the annual holding period returns for 2010 through 2014(See Chapter 5 for the HPR formula.)
b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain.
a. The holding period return for 2010 is %. (Round to two decimal places.)
The holding period return for 2011 is %. (Round to two decimal places.)
The holding period return for 2012 is %. (Round to two decimal places.)
The holding period return for 2013 is %. (Round to two decimal places.)
The holding period return for 2014 is %. (Round to two decimal places.)
b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain. (Select the best choice below.)
The high-grade corporate bond investment has outperformed the market. The average rate of return for the investment is 16.62 % versus the average market rate of
5.83 %.
The market has outperformed the corporate bond investment. The average rate of return for the investment is 5.83 % versus the average market rate of 16.62 %.
Click to select your answer(s).
In: Finance
Hershey Company is one of the world’s leading producers of chocolates, candies, and confections. The company sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hershey’s consolidated balance sheets for 2009 and 2010 follow: 2009 2010
| Hershey: Consolidated Balance Sheets (millions) | 2009 | 2010 |
|
Assets |
||
|
Current Assets |
||
|
Cash and Equivalents |
$ 253.6 |
$ 884.6 |
|
Accounts Receivable, Trade |
410.4 |
390.1 |
|
Inventories |
519.7 |
533.6 |
|
Deferred Income Taxes |
39.9 |
55.8 |
|
Prepaid Expenses and Other Assets |
161.8 |
141.1 |
|
Total Current Assets |
1,385.4 |
2,005.2 |
|
Property, Plant, and Equipment, net |
1,404.8 |
1,437.7 |
|
Goodwill and Intangible Assets |
571.6 |
524.1 |
|
Other Intangible Assets |
125.5 |
123.1 |
|
Deferred Income Taxes and Other Assets |
187.7 |
182.6 |
|
Total Assets |
$ 3,675.0 |
$ 4,272.7 |
|
Liabilities and Shareholders’ Equity |
||
|
Current Liabilities |
||
|
Accounts Payable |
$ 287.9 |
$ 410.7 |
|
Accrued Liabilities and Taxes |
583.4 |
602.7 |
|
Short-Term Debt |
24.1 |
24.1 |
|
Current Portion of Long-Term Debt |
15.2 |
261.4 |
|
Total Current Liabilities |
910.6 |
1,298.9 |
|
Long-Term Debt |
1,502.7 |
1,541.8 |
|
Other Long-Term Liabilities |
501.4 |
494.4 |
|
Total Liabilities |
2,914.7 |
3,335.1 |
|
Shareholders’ Equity |
||
|
Common Stock |
359.9 |
359.9 |
|
Additional Paid-In Capital |
394.7 |
434.9 |
|
Retained Earnings |
4,148.3 |
4,374.7 |
|
Treasury Stock |
(3,979.6) |
(4,052.1) |
|
Accumulated Other Comprehensive Loss |
(202.9) |
(215.1) |
|
Noncontrolling Interests |
39.9 |
35.3 |
|
Total Shareholders’ Equity |
760.3 |
937.6 |
|
Total Liabilities and Shareholders’ Equity |
$ 3,675.0 |
$ 4,272.7 |
Additional information for 2010:
Total sales $5,671.0
Costs of goods sold $3,255.8
Net income $ 509.8 2.
Compute the following ratios for 2010. Provide a brief description of what each ratio reveals about Hershey.
e. Quick f. Inventory turnover days
g. Accounts receivable turnover days
h. Accounts payable turnover days
i. Operating cycle (in days)
j. Total asset turnover
In: Accounting
On July 1, 2015, ABC Co. issued 10-year, $4,574 million maturity value, 3% coupon bonds when the market rate was 2% for a cash price of $4,994 million. Interest was payable semi-annually on Dec. 31 and June 30. ABC also issued $3,527 million face value, 20-year, zero coupon bonds on July 1, 2017 that mature June 30, 2037 for a cash price of $2,619 million. The effective market interest rate at issuance was 1.5%. ABC repurchased $1,143 million face value coupon bonds on June 30, 2020 for $1,220 million cash (after interest was paid) and $582 million in face value of the zero- coupon bonds on June 30, 2021 for a purchase price of $432 million cash. 7. Why might company managers choose to issue zero-coupon bonds instead of interest-bearing bonds or coupon bonds instead of zero- coupon bonds? Give pros and cons of each. Why might they decide to repurchase some of the bonds before the maturity date? Be sure to consider whether management may choose to repurchase when interest rates are increasing or decreasing (both) and explain why.
In: Accounting
|
5. Saving and net flows of capital and goods In a closed economy, saving and investment must be equal, but this is not the case in an open economy. In the following problem, you will explore how saving and investment are connected to the international flow of capital and goods in an economy. Before delving into the relationship between these various components of an economy, you will be asked to recall some relationships between aggregate variables that will be useful in your analysis. Recall the components that make up GDP. National income (YY) equals total expenditure on the economy's output of goods and services. Thus, where CC = consumption, II = investment, GG = government purchases, XX = exports, MM = imports, and NXNX = net exports:
Also, national saving is the income of the nation that is left after paying for . Therefore, national saving (SS) is defined as:
Rearranging the previous equation and solving for YY yields YY = . Plugging this into the original equation showing the various components of GDP results in the following relationship:
This is equivalent to SS = , since net exports must equal net capital outflow (NCONCO, also known as net foreign investment). Now suppose that a country is experiencing a trade surplus. Determine the relationships between the entries in the following table, and enter these relationships using the following symbols: > (greater than), < (less than), or = (equal to).
|
|||||||||||||||||||||||||||
In: Economics
Questions 4 through 10 that follow are based on the following December 31, 20X6 year-end account balances for XYZ Co. after adjusting entries had been prepared but before the books were closed for the year. Using the attached information, prepare the adjusted trial balance on December 31, 20X6, prepare the income statement for the year ended December 31, 20X6, Prepare the statement of retained earnings for the year ended December 31, 20X6, Prepare the statement of financial position as of December 31, 20X6, Determine the working capital on December 31, 20X6,Determine the current ratio on December 31, 20X6,Determine the acid-test (quick) ratio on December 31, 20X6.
Cash……………..…………………………….250,000
Accounts receivable…………………….……..680,000
Marketable securities…………………………...60,000
Prepaid insurance……………………………….35,000
Prepaid rent….………………………………….30,000
Office equipment…………………………….....620,000
Accumulated depreciation: equipment………...200,000
Land……………………………………………750,000
Accounts payable………………………………306,000
Dividends payable……………………………… 50,000
Interest payable…………………………………... 8,750
Income tax payable……………………………...30,000
Unearned client service revenue………………..180,000
Notes payable (long-term).……………………..350,000
Common stock………………………………….750,000
Retained earnings….…………………………....315,200
Dividends…………………………………….......75,000
Client service revenue………………………...1,200,000
Travel expense………………………………..…..28,000
Office supplies expense…………………………..20,000
Advertising expense………………………………45,000
Salary expense…………………………………...400,000
Utility expense………………………………….....40,000
Depreciation expense: equipment…………………25,000
Interest expense……………………………….…...17,500
Insurance expense……………………………….....52,000
Rent expense……………………………………..175,000
Income tax expense………………………………..87,450
In: Accounting