Delta has 500,000 common shares outstanding. The firm is projecting a 20% increase in net sales for the coming year (20X3). Delta uses the percentage of sales approach to plan for its financing needs. In using this approach, the firm assumes that cost of goods sold, depreciation, all assets (current and fixed), and accounts payable will all remain a constant percentage of sales. The firm will aim to maintain its dividend payout of 35% for the foreseeable future. The interest rate charged on notes payable and long-term debt is also expected to remain the same in.

1. Construct the pro-forma statement of comprehensive income and statement of financial position for Delta Corporation for 20X3. Calculate the external financing needed (EFN) for 20X3. Round all your numbers in the pro-forma statements to the nearest dollar.

2. How will the external financing needed (EFN) for 20X3 be affected if Delta is only operating at 70% capacity? Interpret this EFN number, and explain what the firm can do with it.

3.What is Delta’s internal growth rate for 20X2? Round your final answer in percentage to two decimal places.

4.What is Delta’s sustainable growth rate for 20X2? Round your final answer in percentage to two decimal places.

5.Explain how Delta could go bankrupt if it wants to grow its sales by 100% for 20X3.

The City of Waterman established a capital projects fund for the construction of an access ramp from the parking garage to the city’s office building to be used by individuals with disabilities. The estimated cost of the ramp is $217,000. On January 1, 20X2, a 10 percent, $154,000 bond issue was sold at 103 with the premium transferred to the debt service fund. At that date, the county board provided a $63,000 grant. After a period of negotiation, the city council awarded a construction contract for $177,000 on April 5, 20X2. The ramp was completed on August 8, 20X2; its actual cost was $185,000. The city council approved payment of the total actual cost of $185,000. In addition to the $185,000, the ramp was carpeted with all-weather material at a cost of $7,500. On November 3, 20X2, the city council gave the final approval to pay for the ramp and the carpeting. After all bills were paid, the remaining fund balance was transferred to the debt service fund. The City of Waterman established a debt service fund to account for the financial resources used to service the bonds issued to finance the ramp is $217,000. The 10 percent, $154,000 bond issue was sold at 103 on January 1, 20X2. It is a 10-year serial bond issue. The resources to pay the interest and annual principal will be from a property tax levy. Additional Information: The operating budget for 20X2 included estimated revenue of $37,700. Budgeted appropriations included $15,400 for principal, $15,400 for interest, and $5,300 for other items. The budget also included an estimated transfer in of $6,900 from the capital projects fund. The property tax levy was for $41,800 and an allowance for uncollectibles of $5,200 was established. Collections totaled $35,400. The remaining taxes were reclassified as delinquent and the allowance was reduced to $1,200. The bond premium was received from the capital projects fund. The current portion of the serial bonds and the interest due this year were recorded and paid. Other expenses charged to the debt service fund totaled $1,880, of which $1,280 was paid. The nominal accounts were closed.

Prepare entries for parts I-L

• I

  Record the payment of the approved vouchers.

• J

  Record the transfer of the unspent funds in the capital projects fund to the debt service fund.

• K

  Record the entry to close the budgetary accounts.

• L

  Record the entry to close the nominal accounts.

The City of Waterman established a capital projects fund for the construction of an access ramp from the parking garage to the city’s office building to be used by individuals with disabilities. The estimated cost of the ramp is $200,000. On January 1, 20X2, a 10 percent, $150,000 bond issue was sold at 104.0 with the premium transferred to the debt service fund. At that date, the county board provided a $50,000 grant. After a period of negotiation, the city council awarded a construction contract for $182,000 on April 5, 20X2. The ramp was completed on August 8, 20X2; its actual cost was $189,000. The city council approved payment of the total actual cost of $189,000. In addition to the $189,000, the ramp was carpeted with all-weather material at a cost of $5,500. On November 3, 20X2, the city council gave the final approval to pay for the ramp and the carpeting. After all bills were paid, the remaining fund balance was transferred to the debt service fund. The City of Waterman established a debt service fund to account for the financial resources used to service the bonds issued to finance the ramp is $200,000. The 10 percent, $150,000 bond issue was sold at 104.0 on January 1, 20X2. It is a 10-year serial bond issue. The resources to pay the interest and annual principal will be from a property tax levy. Additional Information: 1. The operating budget for 20X2 included estimated revenue of $35,000. Budgeted appropriations included $15,000 for principal, $15,000 for interest, and $4,000 for other items. The budget also included an estimated transfer in of $5,000 from the capital projects fund. 2. The property tax levy was for $40,000 and an allowance for uncollectibles of $4,000 was established. Collections totaled $35,000. The remaining taxes were reclassified as delinquent and the allowance was reduced to $1,000. The bond premium was received from the capital projects fund. 3. The current portion of the serial bonds and the interest due this year were recorded and paid. Other expenses charged to the debt service fund totaled $1,700, of which $1,200 was paid. 4. The nominal accounts were closed. Required: a. Prepare entries for the debt service fund for 20X2. b. Prepare a balance sheet for the debt service fund as of December 31, 20X2. c. Prepare a statement of revenues, expenditures, and changes in fund balance for the debt service fund for 20X2.

DataPoint Engineering is considering the purchase of a new piece of equipment for $310,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $130,000 in nondepreciable working capital. $52,000 of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 12–11, Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Year   Amount
1   $   206,000     
2      174,000     
3      144,000     
4      129,000     
5      102,000     
6      92,000     

The tax rate is 25 percent. The cost of capital must be computed based on the following:

Cost
(aftertax) Weights
Debt Kd      8.30   %      40   %
Preferred stock Kp      12.40         10     
Common equity (retained earnings) Ke      17.00         50     

a. Determine the annual depreciation schedule. (Do not round intermediate calculations. Round your depreciation base and annual depreciation answers to the nearest whole dollar. Round your percentage depreciation answers to 3 decimal places.)

Year Depreciation Percentage Annual

b. Determine the annual cash flow for each year. Be sure to include the recovered working capital in Year 6. (Do not round intermediate calculations and round your answers to 2 decimal places.)

c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Weighted average cost to capital = ?? %

d-1. Determine the net present value. (Use the WACC from part c rounded to 2 decimal places as a percent as the cost of capital (e.g., 12.34%). Do not round any other intermediate calculations. Round your answer to 2 decimal places.)
Net Present Value = ??

d-2. Should DataPoint purchase the new equipment?
  

Yes
No

rev: 12_05_2019_QC_CS-192444

Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers. The following information is available about the new product:

1. An investment of $1,700,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment needed in the manufacturing process. The company’s required rate of return is 18% on all investments.
2. A standard cost card has been prepared for the sleeping pad, as shown below:

3. The only variable selling and administrative expense will be a sales commission of $10 per pad. The fixed selling and administrative expenses will be $6,557,400 per year.
4. Because the company manufactures many products, no more than 186,000 direct labor-hours per year can be devoted to production of the new sleeping pads.
5. Manufacturing overhead costs are allocated to products on the basis of direct labor-hours.

Required:

1. Assume that the company uses the absorption approach to cost-plus pricing.

a. Compute the markup percentage that the company needs on the pads to achieve an 18% return on investment (ROI) if it sells all of the pads it can produce.

b. What selling price per sleeping pad will the company establish if it uses a markup percentage on absorption cost? (Round intermediate calculations and final answer to 2 decimal places.)

c. Assume that the company is able to sell all of the pads that it can produce. Compute the company’s ROI based on the first year of activity.

2. After marketing the sleeping pads for several years, the company is experiencing a falloff in demand due to an economic recession. A large retail outlet will make a bulk purchase of pads if its label is sewn in and if an acceptable price can be worked out. What is the minimum acceptable price for this special order? (Round your answer to 2 decimal places.)

Pratt is ready to graduate and leave College Park. His future employer (Ferndale Corp.) offers the following four compensation packages from which Pratt may choose. Pratt will start working for Ferndale on January 1, year 1.

Assume that the restricted stock is 1,000 shares that trade at $5 per share on the grant date (January 1, year 1) and are expected to be worth $10 per share on the vesting date at the end of year 1 and that no 83(b) election is made. Assume that the NQOs (100 options that each allow the employee to purchase 10 shares at $5 exercise price). The stock trades at $5 per share on the grant date (January 1, year 1) and is expected to be worth $10 per share on the vesting date at the end of year 1 and that the options are exercised and sold at the end of the year. Also assume that Pratt spends on average $3,000 on health-related costs that would be covered by insurance if he has coverage. Assume that Pratt's marginal tax rate is 35 percent. Assume that Pratt spends $3,000 in after-tax dollars for health expenses when he doesn't have health insurance coverage (treat this as an outflow), and that there is no effect when he has health insurance coverage. (Ignore FICA taxes and the time value of money considerations).

Required:

1. What is the after-tax value of each compensation package for year 1?
2. If Pratt’s sole consideration is maximizing after-tax value for year 1, which scheme should he select?

In an amusement park ride called The Roundup, passengers stand inside a 19.0 m -diameter rotating ring. After the ring has acquired sufficient speed, it tilts into a vertical plane

a)Suppose the ring rotates once every 4.50 s . If a rider's mass is 55.0 kg , with how much force does the ring push on her at the top of the ride?

b)Suppose the ring rotates once every 4.50 s . If a rider's mass is 55.0 kg , with how much force does the ring push on her at the bottom of the ride?

c)What is the longest rotation period of the wheel that will prevent the riders from falling off at the top?

Mercer Corporation acquired $400,000 of Park Company’s bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semiannually on June 30 and December 31. The appropriate market interest rate is 11%, and the bonds are due June 30, 2021.

Required: