For which of the following firms is debt financing most appropriate?
a biotech company whose breakthrough drug will not be approved for the next 10 years
a small oil and gas exploration company facing trouble due to falling gas prices
Silicon Valley tech startup with no revenue
a large, mature industrial conglomerate
In: Finance
Proterra was founded by Dale Hill in 2004 with a vision to design and manufacture world-leading, advanced technology heavy-duty vehicles powered solely by clean domestic fuels. After launching a first successful fleet of alternative fuel buses in the 1990s, Proterra focused on developing the 'bus of tomorrow.' Proterra Inc. also designs and manufactures heavy-duty vehicles including EcoRide, a battery electric and zero-emissions bus, and Proterra Catalyst, an electric transit vehicle. The company manufactures a TerraFlex Energy System that enables customers to select amount and type of energy storage to meet specific route requirements, plus TerraVolt fast-charge batteries, TerraVolt extended range batteries, an on-route charge station and in-depot charging services. It offers financing solutions, route simulation analysis, battery lifecycle management, and standard warranty services (Proterra, 2015). It serves customers throughout the United States. The company is privately owned, but is in the process of becoming a public corporation. With this expectation, the firm's chief executive officer (CEO) has asked for determination of which of two companies appears to be a better peer to compare itself against, New Flyer Industries, Inc. (a Toronto-based firm), or Tesla. Tesla Motor Vehicles designs, develops, manufactures, and sells high-performance fully electric vehicles and stationary energy storage units similar to certain Proterra products. Tesla Motors has subsidiaries in North America, Europe and Asia, with the primary purpose of these subsidiaries being to market, manufacture, sell and/or service their vehicles (Tesla Motors, 2016). New Flyer was founded in 1930, and is now the largest transit bus and motorcoach manufacturer and parts distributor in North America with fabrication, manufacturing, distribution and service centers in Canada and the United States. It is North America's heavy-duty transit bus leader and offers clean diesel, natural gas, diesel-electric hybrid, electric-trolley and battery-electric. Information regarding Tesla and New Flyer is given here, for your use in comparing these firms.
Tesla Versus New Flyer
Significance
Measure
TSLA
NFI
Total Market Value of all outstanding shares.
Market capitalization
33.63B
1.831B
Number of outstanding shares currently held by all shareholders.
Outstanding shares of stock
147.28M
59.742M
A Beta coefficient indicates the systemic risk that an asset has relative to an average asset. A risk-free asset has a Beta of zero.
Beta
1.28
0.16
The return the firm must earn on its existing assets to maintain the value of its stock, and the required return on any investments by the firm that have essentially the same risks as existing operations.
WACC
9.03%
8.34
PE ratio divided by expected future earnings growth (after multiplying the growth rate by 100).
PEG Ratio
18.47
0.5
A measure of profit per dollar of assets.
ROA
-7.04%
6.26%
A measure of how the stockholders fared during the year.
ROE
-113.20%
13.21%
A measure of how much investors are willing to pay per dollar of current earnings. Higher PEs are often taken to mean the firm has significant prospects for future growth.
P/E Ratio
-29.17
25.3
Ratio of Net income to sales.
Profit Margin
-23.91%
-3.83%
References
Bloomberg. United States rates and bonds.
Federal Reserve. (2016). Federal Reserve economic data.
Korosec, K. (2015). This startup is gearing up to be the Tesla of electric buses. Fortune Magazine.
Proterra. (2015). About Proterra.
Securities and Exchange Commission. (n.d.) SEC.gov home.
Tesla Motors. (2016). Tesla Motors, Inc. 2016 annual report.
Yahoo. (n.d.) Yahoo finance.
Assume that you are the finance manager for Proterra and you have been asked to provide an analysis of the following issues, as the firm develops benchmarks for its cost of capital (WACC) estimates. The firm's CEO has instructed you to use the pure play approach to estimate its WACC cost of capital, and has chosen Tesla Motors (ticker symbol TSLA) and New Flyer (ticker symbol NYI.TO) as possible representative peers (Korosec, 2015).
QUESTION: Analyze the relative applicability or inapplicability of utilizing these firms as peers to evaluate Proterra's likely cost of capital, with the given above data about Proterra, Tesla and New Flyer, and the lessons of Capital Market History.
In: Finance
Following is a partially completed balance sheet for Hoeman Inc. at December 31, 2020, together with comparative data for the year ended December 31, 2019. From the statement of cash flows for the year ended December 31, 2020, you determine the following:
Required:
Prepare a statement of cash flows for the year ended December 31, 2020, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)
Complete the December 31, 2020, balance sheet. (Hint: Long-term debt is the last number to compute to make the balance sheet balance.)
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In: Accounting
When calculating the NCI share of equity the step approach is used. Demonstrate the step approach, explaining in detail each journal entry, using the following information:
Time Ltd acquired 90% of Out Ltd for $252,000 cash on 1 July 2018. At that date the equity of Out included the following:
Share Capital $200 000
Retained Earnings 80 000
280 000
On 30 June 2020, Out Ltd provided the following information:
Profit after tax $ 40 000
Retained earnings (1/7/19) 100 000
Dividend paid 10 000
In: Accounting
P bought 50 shares of HHH stock in 2014 for $3,000.
In 2016 P bought 100 shares of HHH stock for $5,000
In 2018 P bought 200 shares of HHH stock for $9,000
In 2019 P bought 100 shares of HHH stock for $4,500
In: Accounting
Bensen Company began operations when it acquired $26,700 cash from the issue of common stock on January 1, 2018. The cash acquired was immediately used to purchase equipment for $26,700 that had a $3,500 salvage value and an expected useful life of four years. The equipment was used to produce the following revenue stream (assume all revenue transactions are for cash). At the beginning of the fifth year, the equipment was sold for $2,300 cash. Bensen uses straight-line depreciation.
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Revenue | $7,880 | $8,380 | $8,580 | $7,380 | $0 |
Required
Prepare income statements, statements of changes in stockholders’ equity, balance sheets, and statements of cash flows for each of the five years. Present the statements in the form of a vertical statements model. (Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign.)
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In: Accounting
On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $310,500 when K-Tech’s book value was $410,500. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $207,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $80,000. Also, patented technology (5-year remaining life) was undervalued by $27,000.
In 2020, K-Tech reports $22,500 net income and declares no dividends. At the end of 2021, the two companies report the following figures (stockholders’ equity accounts have been omitted):
| French Company Carrying Amounts |
K-Tech Company Carrying Amounts |
K-Tech Company Fair Values |
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| Current assets | $ | 625,000 | $ | 305,000 | $ | 325,000 | |||||
| Trademarks | 265,000 | 205,000 | 285,000 | ||||||||
| Patented technology | 415,000 | 155,000 | 182,000 | ||||||||
| Liabilities | (395,000 | ) | (125,000 | ) | (125,000 | ) | |||||
| Revenues | (905,000 | ) | (405,000 | ) | |||||||
| Expenses | 495,000 | 305,000 | |||||||||
| Investment income | Not given | ||||||||||
Note: Parentheses indicate a credit balance.
In 2021, assuming K-Tech has declared no dividends, what are the noncontrolling interest’s share of the subsidiary’s income and the ending balance of the noncontrolling interest in the subsidiary?
a) $34,640 and $245,280.
b) $31,960 and $250,640.
c) $26,600 and $234,480.
d) $40,000 and $216,000.
In: Accounting
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In: Accounting
On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $313,500 when K-Tech’s book value was $413,500. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $209,000. At the acquisition date, K-Tech's trademark (20-year remaining life) was undervalued in its financial records by $80,000. Also, patented technology (10-year remaining life) was undervalued by $29,000.
In 2020, K-Tech reports $25,500 net income and declares no dividends. At the end of 2021, the two companies report the following figures (stockholders’ equity accounts have been omitted):
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French Company Carrying Amounts |
K-Tech Company Carrying Amounts |
K-Tech Company Fair Values |
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| Current assets | $ | 629,000 | $ | 309,000 | $ | 329,000 | |||||
| Trademarks | 269,000 | 209,000 | 289,000 | ||||||||
| Patented technology | 419,000 | 159,000 | 188,000 | ||||||||
| Liabilities | (399,000 | ) | (129,000 | ) | (129,000 | ) | |||||
| Revenues | (909,000 | ) | (409,000 | ) | |||||||
| Expenses | 491,000 | 309,000 | |||||||||
| Investment income | Not given | ||||||||||
What is the 2021 consolidated net income before allocation to the controlling and noncontrolling interests?
In 2021, assuming K-Tech has declared no dividends, what are the noncontrolling interest’s share of the subsidiary’s income and the ending balance of the noncontrolling interest in the subsidiary?
In: Accounting
One study reports that 34% of newly hired MBAs are confronted with unethical business practices during their first year of employment. One business school dean wondered if her MBA graduates had similar experiences. She surveyed recent graduates from her school's MBA program to find that 31% of the 129 graduates from the previous year claim to have encountered unethical business practices in the workplace. Can she conclude that her graduates' experiences are different?
What is the value of the test statistic?
A. The assumptions and conditions are not met, so the test cannot proceed.
B.The test statistic is? (Round to two decimal places as needed.)
What is P-value of the test statistic?
A. P-value? (Round to three decimal places as needed.)
B. The assumptions and conditions are not met, so the test cannot proceed.
In: Statistics and Probability