Dakota Inc. and Jersey & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years:

a. Determine the earnings per share in Year 2 and Year 1 for each company. Round your answers to two decimal places.

b. Evaluate the relative profitability of the two companies.

earnings per share for Year 1 and Year 2 are higher than . However, from Year 1 to Year 2, the earnings per share for both companies . The slowing world economy contributed to the from Year 1 to Year 2. Overall, appears to be the more profitable company.

Dakota Inc. and Jersey & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years:

a. Determine the earnings per share in Year 2 and Year 1 for each company. Round your answers to two decimal places.

b. Evaluate the relative profitability of the two companies.

earnings per share for Year 1 and Year 2 are higher than . However, from Year 1 to Year 2, the earnings per share for both companies . The slowing world economy contributed to the from Year 1 to Year 2. Overall, appears to be the more profitable company.

5.Jeremy is a calendar-year taxpayer who sometimes leases his business equipment to local organizations. He recorded the following receipts this year: $840 from the Ladies’ Club for leasing the trailer from December of this year through March of next year ($210 per month). How much of this payment is taxable income to Jeremy this year if Jeremy is a cash-method taxpayer?

6.Jeremy is a calendar-year taxpayer who sometimes leases his business equipment to local organizations. He recorded the following receipts this year: $500 lease payment received from the Men’s Club this year for renting Jeremy’s trailer last year. Jeremy billed them last year. How much of this payment is taxable income to Jeremy this year if Jeremy is an accrual-method taxpayer?

7.In January of year 0, Justin paid $6,800 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. The policy covers the business property from April 1 of year 0 through March 31 of year 1.   What amount of the insurance premium may Justin deduct in year 0?

8.In January of year 0, Justin paid $6,800 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. The policy begins on February 1 of year 1 and extends through January 31 of year 2. What amount of the insurance premium may Justin deduct in year 0?

3. Pure expectations theory: Two-year bonds

Which of the following is consistent with the pure expectations theory of the yield curve? Check all that apply.

A flat yield curve suggests that the market thinks interest rates in the future will be the same as they are today.

A downward-sloping yield curve suggests that the market thinks interest rates in the future will be lower than they are today.

A flat yield curve suggests that the market thinks interest rates in the future will be higher than they are today.

A downward-sloping yield curve suggests that the market thinks interest rates in the future will be higher than they are today.

Brian would like to invest a certain amount of money for two years and considers investing in a one-year bond that pays 3 percent and a two-year bond that pays 7 percent. Brian is considering the following investment strategies:

If the one-year bond purchased in year two pays 7 percent, Brian will choose (STRATEGY A OR B)

.

Which of the following describes conditions under which Brian would be indifferent between Strategy A and Strategy B?

The rate on the one-year bond purchased in year two pays 11.155 percent.

The rate on the one-year bond purchased in year two pays 11.601 percent.

The rate on the one-year bond purchased in year two pays 12.047 percent.

The rate on the one-year bond purchased in year two pays 9.482 percent.

What is the value of a stock which pays a $4 dividend/year (first dividend in one year), not growing until year 10, then growing at 5% per year from year 10 to 11 and every year thereafter, if the discount rate is 10%?

What is the NPV of a project that has an initial investment of $7,300, with end of year cash flows as follows: year 1: $1,500 year 2: $2,500 year 3: $3,000 year 4: $2,500 year 5: $1,500 The interest rate is 8%

Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?

Project D Project E Project F

Cost 205,000.00 179,000.00 110,000.00

Inflow year 1 53,000.00 51,000.00 25,000.00

Inflow year 2 50,000.00 87,000.00 55,000.00

Inflow year 3 48,000.00 41,000.00 21,000.00

Inflow year 4 30,000.00 52,000.00 9,000.00

Inflow year 5 24,000.00 40,000.00 35,000.00

Payback Period EXACT 5 YEARS EXACT 3 YEARS EXACT 4 YEARS PROJECT E

Refer to the Solved Example 9.1 on pg. 259 of your text...THE BELOW IS JUST AN EXAMPLE FROM THE BOOK OF HOW THE QUESTION NEEDS TO BE ANSWERED.

shows the calculations of the present value of each of the future cash flows discounted at 6%. We can now determine how long it will take to recover the initial investment for the two copy machines in current dollars.

For Copier A,

Year 1: ? $5,000.00 + $2,358.49 = ? $2,641.51 remaining cost to recover Year 2: ? $2,641.51 + $2,224.99 = ? $416.52 remaining cost to recover Year 3: ? $416.52 + $2,099.05 = $1,682.53; the cost is fully recovered by the end of year 3.

For Copier B,

Year 1: ? $5,000.00 + $1,415.09 = ? $3,584.91 remaining cost to recover Year 2: ? $3,584.91 + $2,224.99 = ? $1,359.92 remaining cost to recover Year 3: ? $1,359.92 + $2,938.67 = $1,578.75; the cost is fully recovered by the end of year 3.

Calculations Year 1 Year 2 Year 3 Year 4 Year 5 (THESE NEED TO BE SHOWN IN EXCEL) HOW THE ANSWER WAS OBTAINED

Formulas Year 1 Year 2 Year 3 Year 4 Year 5 (THESE NEED TO BE SHOWN IN EXCEL) THE FORMULAS USED TO GET THE ANSWER

Gibson Manufacturing pays its production managers a bonus based on the company’s profitability. During the two most recent years, the company maintained the same cost structure to manufacture its products.

(Assume that selling and administrative expenses are associated with goods sold.)

Gibson sells its products for $109.50 per unit.

Required

a Prepare income statements based on absorption costing for Year 2 and Year 3.

b Since Gibson sold the same number of units in Year 2 and Year 3, why did net income increase in Year 3?

4. Determine the costs of ending inventory for Year 3.

5. Prepare income statements based on variable costing for Year 2 and Year 3.

A, Year 2

A, Year 3

B:

D.

E. Year 2

E. Year 3