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3.) During the year, Kingbird was sued by a competitor for a patent violation. The competitor is claiming that Kingbird’s liability is $2,400,000. Kingbird’s attorneys have advised it that it is probable that the court will find for the company’s competitor. The attorneys estimate that the liability under the suit could be as little as $96,000 or as much as $480,000. The attorneys do not believe any amount within this range is a better estimate of Kingbird’s liability than any other amount within the range. For the question above, if there is a range for the lawsuit, as in the example above, do you still record this as a lawsuit liability (or no entry) ? If so, what would you record and why ? |
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4.) Kingbird provides one-year warranties on the laptops it sells. During the year, Kingbird’s laptop sales totaled $96,000,000. Historically, Kingbird’s warranty liability has been one percent of total sales. Kingbird began the year with a warranty liability balance of $770,000. Warranty expenditures during the year were $745,000 for computers sold in prior years and $230,000 for computers sold during the year. These expenditures were recorded as credits to cash and debits to the warranty liability account. Any remaining warranty liability is expected to relate to computers sold during the current year. I know the estimated warranty liability is $960,000 for the year. I worked out part of the problem ( I think it is right so far, if not please correct me), and then does the 230,000 get debited from the warranty liability in this t chart?
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In: Accounting
A university gives every student an entrance exam at the beginning of their freshman year. The exam includes general knowledge questions and specific subject questions. Scores are recorded in each students file and used for course placement purposes. Each year 25 students are randomly sampled for further questioning and testing. The scores for all students in the Fall of 2019 are normally distributed with mean 81 and standard deviation 5.
Suppose you were asked the next two questions (don’t answer them yet!):
Question A: “What is the probability a randomly chosen student
from the Fall 2019 scores better than 83 on the exam?”
Question B: “What is the chance the average of the sampled 25
students on the entrance exams is more than 83?
(3 points) In which question (Question A or Question B) would you need to use the central limit theorem to solve? Why?
(4 points) For each Question A and Question B the solution and
distribution is below.
Your tasks are to:
Indicate which graph/solution represents
the correct answer for each question.
State why you believe the graph/solution is
correct.
State why you believe the remaining
graphs/solutions are incorrect.
In: Statistics and Probability
Consider a call option with an exercise price of $110 and one year to expiration. The underlying stock pays no dividends, its current price is $110, and you believe it has a 50% chance of increasing to $120 and a 50% chance of decreasing to $100. The risk-free rate of interest is 10%
What is the hedge ratio?
What is the value of the riskless (perfectly hedged) portfolio one year from now?
What is the value of the call option ?
In: Finance
The price of a zero-coupon bond with maturity 1 year is $943.40. The price of a zero-coupon bond with maturity 2 years is $898.47. For this problem, express all yields as net (not gross) rates. Assume the face values of the bonds are $1000.
Assuming the liquidity preference theory is valid and the liquidity premium in the second year is 0.01, what is the expected short rate in the second year?
Assuming that the expectations hypothesis is valid, what is the expected price of the 2 year bond at the beginning of the second year?
In: Finance
Milo deposits $500 at the beginning of each year for 2 years into a fund that earns 8% annual effective. Half of the interest is reinvested at 10% annual effective and the remaining half is reinvested in Milo’s pocket (at 0%). Calculate the accumulated value in all three accounts in 10 years.
No excel solution please
In: Finance
A major flooding in a given year has a Poisson distribution with a mean occurrence of 2.5
d) How many months have to pass to be in the 80th percentile?
Thank you!!
In: Statistics and Probability
Consider that you own the following position at the beginning of the year: 200 shares of US Bancorp at $29.89 per share, 300 shares of Micron Technology at $13.31 per share, and 250 shares of Hilton Hotels at $24.11 per share. During the year, US Bancorp and Hilton Hotels both paid a dividend of $1.39 and $0.16, respectively. At the end of the year, the stock prices of US Bancorp, Micron, and Hilton Hotels were $36.19, $13.12, and $34.90, respectively. What are the dollar and percentage return of the stocks and the return of the portfolio?
In: Finance
In a survey of 2199 adults in a recent year, 1339 say they have made a New Year's resolution.
Construct 90% and 95% confidence intervals for the population proportion. Interpret the results and compare the widths of the confidence intervals.
The 90% confidence interval for the population proportion p ( ), ( )
(Round to three decimal places as needed.)
The 95% confidence interval for the population proportion p ( ), ( )
In: Statistics and Probability
It is the end of 2019. In the most recent year (2019), UPipe had an EBIT of $170 million. Depreciation was $34 million, increase in net working capital was $17 million and capital expenditure was $42.5 million.
Over the next 4 years, EBIT is expected to grow by 20% per year, depreciation by 15% per year, capital expenditure by 25% per year and change in net working capital by 15% per year. The annual free cash flow is expected to grow by 3% per year after 2023.
The weighted average cost of capital is 13% and the average tax rate is 21%. The firm has $430 million of debt and 10 million shares outstanding.
1. What was the free cash flow in 2019 (in $ million)?
2. What is the expected free cash flow in 2023 (in $ million)?
3. What is the terminal value in 2023 (in $ million)?
4. What is the firm value today (in $ million)?
5. What should be the stock price now?
In: Finance
Goodwill is typically evaluated to impairment loss at least once a year. Why is this? An example would be greatly appreciated!
I'm currently taking Intermediate Accounting 2.
In: Accounting