What is the average monthly return and standard deviation of returns for

(i) S&P 500:

(ii) GE:

Jensen and Meckling (1976) refers to the costs that arise due to the use of an agent by a principal in an agency relationship as agency cost. These costs include (1) the costs of opportunistic behaviour by the agent (such as when the agent places his own self-interest over that of the principal’s), (2) the costs to the principal of monitoring the agent; and (3) the “bonding” costs incurred by the agent to induce the principal to rely on it. Nonetheless, the opportunistic behaviour of the agent may work in the favour of principal when the agent contracts with other parties such as debtholder. This phenomenon has been explained as the agency cost of debt (Kim and Sorenson, 1986). Furthermore, Coffee, Jackson, Mitts and Bishop (2018) extend the agency cost argument to the relationship between the different types of shareholders associated with modern corporations. Specifically, Coffee et al., (2018) find that there is the tendency for strong and powerful shareholders to exploit less powerful shareholders. These empirical evidences suggest that any investor may be susceptible to some form of exploitation as result of the agency relationship and its associated agency problem.

Critically examine the following scenarios and state with explanation;

Whether an investor has a high, medium or low level of agency cost

The type of agency cost likely to be assume an investor

The type of corporate governance mechanism which would be appropriate in addressing the type of agency cost

Note: the following scenarios are independent of each other.

SCENARIO ONE

ABC Ltd, an Australian based firm is a large manufacturing firms with 25 subsidiaries which operates from different part of the world. On 30th July 2018, Birim Equity fund acquired an additional 25% of shares of ABC Ltd resulting in its total shareholding of 48%. The Herald Sun in its business segment described the acquisition as one which makes Birim Equity a dominant shareholder. How would this situation affect agency cost for prospective investor if

Birim Equity is separated from management

Birim Equity is not separated from management

SCENARIO TWO

Michael Bloomberg, a recent graduate of La Trobe University received $0.5 million cash as his inheritance after the death of his father. Michael has decided to invest his wealth in a listed firm which characterised by many shareholders with each shareholder having a small amount of shares

SCENARIO THREE

Tori, a small-time investor, has decided to invest in Dada PLC. Dada PLC has a large bank loan on its books.

Please use the following papers to critically examine the scenarios:

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.

Kim, W. S., & Sorensen, E. H. (1986). Evidence on the impact of the agency costs of debt on corporate debt policy. Journal of Financial and quantitative analysis, 21(2), 131-144.

Coffee, J. C., Jackson, R. J., Mitts, J., & Bishop, R. (2018). Activist Directors and Agency Costs: What Happens When an Activist Director Goes on the Board?

Required Length: 500 words excluding the references.

Marking criteria

Marks will be allocated to:

Clear and concise discussion of the key points

Relevance to the topic and evidence of wide reading/research

Presentation – format, spelling, vocabulary, readability

Appropriate referencing, including in-text referencing and a reference listStudents may follow either:

Harvard referencing style or ;

APA 6 referencing style

The CPI is 110 on January 1, 2018, and 114 on January 1, 2019. John’s nominal wage is $1,000 per month on January 1, 2018, and $1,100 per month on January 1, 2019.

1. What is John's real wage on January 1, 2018?
2. Use the CPI to calculate the inflation rate in 2018.
3. What is the percentage increase in John's nominal wage from 2018 to 2019?
4. Using the arithmetic trick, what is the approximate percentage change in John’s real wage?
5. According to the change in John’s real wage, is he better off or worse off?

Duluth Ranch, Inc. purchased a machine on January 1, 2018. The cost of the machine was $30,500. Its estimated residual value was $9,500 at the end of an estimated 5-year life. The company expects to produce a total of 10,000 units. The company produced 1,150 units in 2018 and 1,600 units in 2019.


Required:

a. Calculate depreciation expense for 2018 and 2019 using the straight-line method.

b. Calculate the depreciation expense for 2018 and 2019 using the units-of-production method.

c. Calculate depreciation expense for 2018 through 2022 using the double-declining balance method.

Cussatt Construction Company had a contract starting April 2018, to construct a $48,000,000 building that is expected to be completed in September 2020, at an estimated cost of $44,000,000. At the end of 2018, the costs to date were $20,240,000 and the estimated total costs to complete had not changed. The progress billings during 2018 were $4,800,000 and the cash collected during 2018 was $6,400,000. Cussatt uses the percentage-of-completion method. For the year ended December 31, 2018, Cussatt would recognize gross profit on the building of: A) $ 1,840,000 B) $ 1,686,666 C) $ 2,160,000 D) $   0  

Duluth Ranch, Inc. purchased a machine on January 1, 2018. The cost of the machine was $32,000. Its estimated residual value was $10,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,200 units in 2018 and 1,650 units in 2019.


Required:

1. Calculate depreciation expense for 2018 and 2019 using the straight-line method.
2. Calculate the depreciation expense for 2018 and 2019 using the units-of-production method.
3. Calculate depreciation expense for 2018 through 2022 using the double-declining balance method.

Duluth Ranch, Inc. purchased a machine on January 1, 2018. The cost of the machine was $38,000. Its estimated residual value was $12,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,400 units in 2018 and 1,850 units in 2019.


Required:

Calculate depreciation expense for 2018 and 2019 using the straight-line method.

Calculate the depreciation expense for 2018 and 2019 using the units-of-production method.

Calculate depreciation expense for 2018 through 2022 using the double-declining balance method.

On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:

Dreamworld had the following debt obligations outstanding during both years:

Construction loan, 10%             $500,000

             Long-term note, 12%                      $2,500,000

Required: What would Dreamworld's capitalized interest be in 2018?

1)The trial balance for unearned compensation for 2018 is 15,000 and 2019 is 5,000. What would the journal entry look like for this problem?

2)The trial balance for land in 2018 is 100,000 and 2019 is 232,000. What would the journal entry look like for this problem if it is paid with cash?

3)The trial balance for Plant Assets in 2018 is 555,000 and 2019 is 783,072. What would the journal entry look like for this problem if the

trial balance reports A/D of 250,000 in 2018 and in 2019 is 275,000? There is also a trial balance in 2018 of 70,000 and in 2019 of 238,072 for Notes Payable.

The profit before tax, as reported in the Statement of Profit or Loss and Other Comprehensive Income of Diamond Ltd for the year ended 30 June 2019, amounted to $50,000 including the following revenue and expense items.

The Statement of Financial Position of the company at 30 June 2019 showed the following assets and liabilities.

Additional information

·        Accumulated depreciation of plant for tax purposes was $42,000 at 30 June 2019, and depreciation for tax purposes for the year ended 30 June 2019 amounted to $7,000.

·        The tax rate is 30%.

Required

1. Prepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2019.
2. Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts as at 30 June 2019.