Describe the effect of a distribution in a year when the distributing corporation has:

a.       A deficit in accumulated E&P and a positive amount in current E&P.

b.       A positive amount in accumulated E&P and a deficit in current E&P.

c.       A deficit in both current and accumulated E&P.

d.       A positive amount in both in both current and accumulated E&P.

Assume that it is the end of year 2015 and you have an opportunity to buy the stock of​ CoolTech, Inc., an IPO being offered for ​$4.92 per share. Although you are very much interested in owning the​ company, you are concerned about whether it is fairly priced. To determine the value of the​ shares, you have decided to apply the free cash flow valuation model to the​ firm's financial data that​ you've developed from a variety of data sources. The key values you have compiled are summarized in the following​ table,

FREE CASH FLOW

Year(t) FCF Other Data

2016 . $660,000 . Growth Rate of FCF, beyond 2019 to infinity = 2%

2017 . $740,000 . Weighted average cost of capital = 12%

2018 . $850,000 . Market value of all debt = $1,780,000

2019 . $1,000,000 . Market value of preferred Stock = $710,000

Number of shares of common stock to be issued = 1,100,000

a. Use the free cash flow valuation model to estimate​ CoolTech's common stock value per share.

b.  Judging on the basis of your finding in part a and the​ stock's offering​ price, should you buy the​ stock?

c. On further​ analysis, you find that the growth rate in FCF beyond 2019 will be 3​% rather than 2​%. What effect would this finding have on your responses in parts a and b​?

What is the duration of a 20 year Treasury with a 2% coupon and a YTM of 2% and face value = $100,000? If rates fall 150bp, what is your estimate of the dollar change in value?

A stock's dividend in 1 year is expected to be $2.4. The dividend is expected to remain the same indefinitely. The stock's required return is 12%. The estimated value of the stock today is $________.

A stock will pay no dividends for the next 3 years. Four years from now, the stock is expected to pay its first dividend in the amount of $2.4. It is expected to pay a dividend of $3 exactly five years from now. The dividend is expected to grow at a rate of 7% per year forever after that point. The required return on the stock is 12%. The stock's estimated price per share exactly TWO years from now, P₂ , should be $______.

1. The current price of a stock is $80, and at the end of one year, its price will be either $88 or $72. The annual risk-free rate is 3.0% based on daily compounding. Based on the binominal model, what is the present value for a 1-year call option on this stock with an exercise price of $86.

2. Warren Corporation's stock sells for $40 per share. The company wants to sell some 10-year, semi annual coupon payment bond, at $1,000 par value. Each bond would have 40 warrants attached to it, each exercisable into one share of stock at an exercise price of $45. The firm's straight bonds yield to maturity is 10%. Each warrant is expected to have a market value of $5 that the stock sells for $42. What annual coupon rate must be set on the bonds in order to sell the bonds-with-warrants at par value?

You will be paying $12,800 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%.

a. What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.)

b. What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.)

c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. What if rates fall to 7%? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)

You will be paying $10,600 a year in tuition expenses at the end of the next two years. Bonds currently yield 7%.

a. What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.)

Present value:|__________________|

Duration: |__________________|years

b. What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.)

Duration: |______________________|years

Future redemption Value: |______________________|

c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 8%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Net position changes by:

d. What if rates fall to 6%? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Net position changes by:

A couple received a $108,000 inheritance the year they turned 48 and in-vested it in a fund that earns 6.5% compounded semiannually (every six months). They leave the money in the account for 12 years (until they retire), and then want to get regular payments from the account, so that all the money is paid during the next 20 years. How much will the couple receive in these regular payments?

You are engaged in the audit of the financial statements of Holman Corporation for the year ended December 31, 20X6. The accompanying analyses of the Property, Plant, and Equipment and related accumulated depreciation accounts have been prepared by the chief accountant of the client. You have traced the beginning balances to your prior year’s audit working papers.

*Depreciation expense for the year.

All plant assets are depreciated on the straight-line basis (no residual value taken into consideration) based on the following estimated service lives: building, 25 years; all other items, 10 years. The company’s policy is to take one half-year’s depreciation on all asset additions and disposals during the year.

Your audit revealed the following information:

The company completed the construction of a wing on the plant building on June 30. The service life of the building was not extended by this addition. The lowest construction bid received was $24,700, the amount recorded in the Buildings account. Company personnel constructed the addition at a cost of $21,400 (materials, $9,300; labor, $7,300; and overhead, $4,800).

On August 18, $6,800 was paid for paving and fencing a portion of land owned by the company and used as a parking lot for employees. The expenditure was charged to the Land account.

The amount shown in the machinery and equipment asset retirement column represents cash received on September 5 upon disposal of a machine purchased in July 20X2 for $62,000. The chief accountant recorded depreciation expense of $4,700 on this machine in 20X6.

Harbor City donated land and a building appraised at $280,000 and $580,000, respectively, to Holman Corporation for a plant. On September 1, the company began operating the plant. Since no costs were involved, the chief accountant made no entry for the above transaction.

Required:

Prepare the adjusting journal entries that you would propose at December 31, 20X6, to adjust the accounts for the above transactions. Disregard income tax implications. The accounts have not been closed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round any division. Round your answers to the nearest dollar amount.)

A. Record the entry to correct the June 30, 20X6 entry for the addition to the building and to correct depreciation.

B. Record the entry to correct the August 13, 20X6 entry for the paving and fencing of the parking lot, and to provide the depreciation thereon.

C.Record the entry to correct the September 5, 20X6 entry for the disposal of the machine and the depreciation thereon.

D. Record the entry for the appraised value of the land and building donated by Harbor City, and the depreciation of the building thereon.

The comparative balance sheets of Sheridan Inc. at the beginning and the end of the year 2017 are as follows.

Net income of $47,980 was reported, and dividends of $28,240 were paid in 2017. New equipment was purchased and none was sold.

Prepare a statement of cash flows for the year 2017. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)