​(Business

and financial

risk​)

Which of the following sources of new earnings volatility demonstrates the effect of business versus financial risk​ (discuss the rationale for your​ decisions):

a. Amos Gooding Real Estate Company recently constructed a new office building and borrowed 100 percent of the money needed to fund the project.

b. Clearing House Outsourcing has historically paid a printer to prepare all of its printed documents.​ However, last year the firm acquired its own printing press​ (paying cash).

c. Smithers Enterprises has been a specialty retail shop that sells outdoor camping equipment. The firm recently decided to purchase a golf course.

a. Amos Gooding Real Estate Company recently constructed a new office building and borrowed 100 percent of the money needed to fund the project.

The fact that the firm borrowed​ 100% of the cost of the new investment suggests that the​ firm's

▼

business

financial

risk has risen.  ​(Select from the​ drop-down menu.)

b. Clearing House Outsourcing has historically paid a printer to prepare all of its printed documents.​ However, last year the firm acquired its own printing press​ (paying cash).

In this instance an outsourcing firm has entered into a new business related to printing.​ Also, the firm paid cash for the asset acquisition. One might think that the​ firm's

▼

business

financial

risk may have changed.  ​(Select from the​ drop-down menu.)

c. Smithers Enterprises has been a specialty retail shop that sells outdoor camping equipment. The firm recently decided to purchase a golf course.

It would appear that this firm may have changed its overall

▼

financial

business

risk since the firm was a specialty retailer and now combines this business with that of a golf course.  ​(Select from the​ drop-down menu.)

The ABC Company bought a new machine on October 1, 2014 for $110,000. It planned to keep the truck for four years at which time it expected to sell the truck for $30,000. The company elected to amortize the truck for financial reporting purposes using the declining balance method with an annual rate of 30%. The company has a December 31 year-end and a corporate income tax rate of 40%. For tax reporting purposes, you may pick one of the following:

·       The company US-based and is required to determine tax depreciation for reporting to the taxation authority using the MACRS 10-year category, or

·       The company is Canadian-based and is required to determine capital cost allowance for reporting to the taxation using a CCA pool rate of 20%.

     Calculate the following for both the years 2014 and 2015:

A.   The depreciation expense for the truck that would be shown on the company's income statement

B.   The amount of tax depreciation (US) or CCA (Canada) that would be claimed, and

C.   the change in deferred taxes.

Depreciation and advance prepayments

Pan Asia Airlines was founded in 1980. Headquartered in Hong Kong, the publicly traded company has routes throughout Asia and to major airports throughout Europe and North America. While Pan Asia charges a premium of 10 to 20% over its competitors, customers have not been deterred from using the airline because of the high quality of service.

A key reason for this reputation for high quality is the company's relatively young fleet of aircraft, with an average age of five years and no plane older than eight years. To maintain a young fleet, Pan Asia replaces its planes regularly to ensure that the planes are equipped with the latest technology and operate efficiently. Other airlines typically have fleets with an average age of 10 years, while discount airlines have even older fleets, with an average age of 15 years. A well-maintained aircraft can last for 20 to 25 years, or even more in some cases.

Each of five regional managers has responsibility for all investment and operating decisions for his/her region. The company evaluates each region as a profit centre. The decentralized structure allows each region to respond quickly to changes in its market.

Financially, the company has been consistently profitable in recent years. Stock analysts have projected a target price that is 20% higher than the current price of $32.50 per share, based on their projections of earnings before interest, taxes, depreciation, amortization (EBITDA). Because of its solid financial performance, Pan Asia has earned a high credit rating, allowing it to borrow at a rate of 6%. Debt currently comprises about 40% of assets, while liquid assets amount to about 10% of assets, which total approximately $2 billion.

It is now February 2012. A new chief executive officer (CEO), William Chan, has been appointed following the retirement of the founding CEO. Chan has a background in mechanical engineering and previously served as Pan Asia's chief operating officer for the past 15 years. While Chan has a thorough understanding of the company's central operations, he is less familiar with other aspects of the company. Consequently, he has spent the last three months reviewing the company's marketing program, human resources, information systems, treasury, as well as accounting.

During this review, Chan has identified a few issues that he would like you, the chief financial officer, to explain to him.

1. The CEO noted that Pan Asia uses the declining-balance method of depreciation. He also noted that many (though not all) competitors use the straight-line method. He wonders whether Pan Asia should consider conforming to the majority in the industry.

2. One of Pan Asia’s manufacturers has recently started a promotion that offers a significant discount to airlines that make advance payments on their aircraft orders. The discount amounts to 15% of the regular price. To obtain the discount, Pan Asia would need to pay in full when it orders a plane, rather than when the manufacturer delivers it. Typically, the amount of time between order and delivery is two years. Chan is unsure whether he should encourage the regional managers to take up this offer. He is also wondering what the effects might be for the financial statements.

Required: Draft a memo to the CEO that addresses the issues raised.

Recruitment and Selection Processes: You need to hire a new Server for a Fast food restaurant. Describe the recruitment and selection processes (Desired knowledge/skills/abilities; Application, interview, and/or tests). How would you structure these selection tools?

The Village of Hawksbill issued $4100,000 in 5 percent general obligation, tax-supported bonds on July 1, 2019, at 101. A fiscal agent is not used. Resources for principal and interest payments are to come from the General Fund Interest payment dates are December 31 and June 30. The first of 20 annual principal payments are to made on June 30, 2020. Hawksbill has a calendar fiscal year.

1. A capital projects fund transferred the premium ( in the amount of $ 41,000) to the debt service fund.

2. On December 31, 2019, funds in the amount of $102,500 were received from the General Fund and the first interest payment was made.

3.The books were closed for 2019

4. On June 30, 2020, funds in the amount of $266,500 were received from the General Fund and the second interest payment ($102,500) was made along with principal payment ( $205,000)

5. On December 31, 2020 funs in the amount of $ 97,375 were received from the General Fund and the third interest payment was made ( also in the amount of $ 97,375)

6.the books were closed for 2020

A. Prepare journal entries to record the events above in the debt service fund

B. Prepare a statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2019

C. Prepare a statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31 2020

7. [Calculating firm value with options] SUNNY Inc. has a bond issue with a face value of $1,000 that is coming due in one year. The value of the company’s assets is currently $1,040. Dr. Min, the CEO, believes that the assets in the company will be worth either $940 or $1,270 in a year. The going rate on one-year T-bills is 4.8% i. What is the value of the company’s equity? ii. What is the value of the debt? iii. What is the interest on debt? iv. Suppose the company can reconfigure its existing assets in such a way that the value in a year will be $850 or $1,750. If the current value of the assets is unchanged, will the stockholders favor such a more?

Select an organization of your choice. The organization can refer to a current or past workplace; it could be anonymous (Company X) or you may mention the name. You can also pick an organization you participate in as a customer/client, trustee, stockholder, stakeholder, or interested party.

Identify your role in relation to the company that you pick. The major requirement is that you have access to enough information about the organization to address the question in some detail.

• What are some of the business research activities of your organization? Why were the undertaken? What was the result?
• What business research activities would you suggest for them if you were the CEO?

You have a job that you really dislike. You have just gone to interview for a job that you really like, and the interview went well, but the result will not be known until a month later, and there is no way you can find out any more information about it before then. In the meantime, another employer offers you a job that is better than your current job, but it demands your acceptance in a week or the offer will be withdrawn forever. Clearly describe how do you can use decision tree analysis and utility theory to help you make the decision about the offer that is better than your current job but not as good as the job you really like.

Your answer should be a set of instructions or a computational procedure that the decision-maker can follow with an example.

For this exercise, select two people in leadership positions to interview. They can be leaders in the formal or informal positions at work, school, or society.

Conduct a 30-minute interview with each leader – ask the leaders to describe the visions they have for their organizations. In addition, ask, “How do you articulate and implement your visions”.

Leader #1 – is the leader vision content, vision articulation, or vision implementation?

Leader #2 – is the leader vision content, vision articulation, or vision implementation?

• What differences and similarities did you observe between the two leaders?
• Did the leaders advocate specific values? If so, what?
• Did the leaders use any unique symbols to promote their visions? If so, what?
• In what ways did the leaders behaviors model their visions to others?