John is looking at several options to fund his son’s 4-year university degree. The university fees of $45,000 a year will have be paid starting 11 years from today. He is analysing an insurance plan that pays out $45,000 a year for 4 years with the first payout 11 years from today. The insurance plan has several payment options:

Option 1 Pay $60,000 today.

Option 2 Beginning 1 year from today, pay $12,000 a year for the next 8 years.

Option 3 Beginning 1 year from today, make payments each year for the next 8 years. The first payment is $11,000 and the amount increases by 5% each year. Answer the following questions regarding the options above:

(a) Calculate the present value of each option. Use a 10% discount rate.

(b) Analyse which option John should choose.

(c) If the discount rate is not given to you, what would be an appropriate discount rate to use?

1. Consider a US company that imports German goods. What effect will a sudden depreciation of the dollar relative to the euro have on the P/E ratio of the U.S. company? Discuss the effect both the possibilities—the company being able to completely pass through the dollar depreciation to its customers and the company being unable to completely pass through the dollar depreciation to its customers. (5 points)

QUESTION 1:

Researchers claim that women speak significantly more words per day than men. One estimate is that a woman uses about 20,000 words per day while a man uses about 7,000. To investigate such claims, one study used a special device to record the conversations of male and female university students over a four- day period. From these recordings, the daily word count of the 20 men in the study was determined. Here are their daily word counts:

What value we should remove from observation for applying t procedures?

A 90% confidence interval (±±10) for the mean number of words per day of men at this university is from  to  words.

Is there evidence at the 10% level that the mean number of words per day of men at this university differs from 9000?

QUESTION 2:

Cola makers test new recipes for loss of sweetness during storage. Trained tasters rate the sweetness before and after storage. Here are the sweetness losses ( sweetness before storage minus sweetness after storage) found by 10 tasters for one new cola recipe:

Take the data from these 10 carefully trained tasters as an SRS from a large population of all trained tasters.

Is there evidence at the 5% level that the cola lost sweetness? If the cola has not lost sweetness, the ratings after should be the same as before it was stored.

The test statisic is t =  (±±0.001)

Assume that Pomo Limited, a US based firm, expects to receive S$800,000 in one year. The existing spot rate of the Singapore dollar is US$0.74. The one-year forward rate of the Singapore dollar is US$0.76. Pomo created a probability distribution for the future spot rate in one year as follows:

Future Spot | Rate Probability

US$0.75 | 20%

US$0.77 | 50%

US$0.81 | 30%

Assume that one-year put options on Singapore dollars are available, with an exercise price of US$0.77 and a premium of US$0.04 per unit. One-year call options on Singapore dollars are available with an exercise price of US$0.74 and a premium of U$0.03 per unit. Assume the following money market rates:

U.S. | Singapore

Deposit rate: 9% | 6%

Borrowing rate: 10% | 7%

Given this information, determine whether a forward hedge, money market hedge, or a currency options hedge would be most appropriate. Then compare the most appropriate hedge to an unhedged strategy, and decide whether Pomo Limited should hedge its receivables position.

a. Calculate the forward contract hedge.

b. Calculate the money market hedge.

c. Calculate the option hedge.

d. Briefly discuss the optimal hedge against the no hedge position of the company.

e. Discuss whether the multi-national corporation (MNC) like Pomo Limited will risk be over-hedged its position to the extent affect the company's financial position.

Van Hatten Consolidated has three operating divisions: DeMent Publishing Division, Ankiel Security Division, and Depp Advisory Division. Each division maintains its own accounting system but follows IFRS.

(a)

For each division’s revenue arrangements, identify the separate performance obligations, briefly explain the allocation of the transaction process to each performance obligation, and indicate when the performance obligations are satisfied.

On November 1, 2017, Whispering Company adopted a stock-option plan that granted options to key executives to purchase 27,300 shares of the company’s $10 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $409,500.

All of the options were exercised during the year 2020: 18,200 on January 3 when the market price was $68, and 9,100 on May 1 when the market price was $78 a share.

Prepare journal entries relating to the stock option plan for the years 2018, 2019, and 2020. Assume that the employee performs services equally in 2018 and 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round intermediate calculations to 5 decimal places, e.g. 1.24687 and final answers to 0 decimal places, e.g. 5,125.)

You are the HR director at Springtime Manufacturing, which employs 75 people. The VP of Human Resources has asked that you evaluate the following situations. Please provide in the format of a memorandum to the VP with captions labeling each issue and addressing the questions posed. (See template at end)

1. Springtime decides to create a new Director of Marketing and Communications position. This position is responsible for overseeing all marketing for the company as well as communicating directly with the press and other major customers about the company, its news and initiatives. Thus, Springtime includes a requirement that the “ideal candidate will be able to communicate clearly and present a positive image of Springtime Manufacturing”. Both May Flower and June Bug apply for the position and are interviewed by the President of the Company, April Showers. Both May and June have appropriate degrees in Marketing and about the same level of experience. May is a practicing Muslim and so wears a headscarf to the interview, as she always does to comply with her religious beliefs. April asks May the same questions as she has asked June, but adds a question about the headscarf. In particular, she asks May whether she always has to wear the headscarf and whether she has encountered “negative reactions” to the scarf. May answers that she does have to wear the scarf and she occasionally has negative reactions. April also asks several other questions about May’s religion. After the interview, April announces that she is hiring June Bug for the position and cites the “Very positive image” that June will present for the company. May sues for discrimination under Title VII. Will she succeed? Why or why not?

Assessment Rubric for Assignment 4-     20 points total

Identification of Legal Issues (Clarity) 5 points Is the legal issue correctly identified for each situation presented?

Analysis Explanation (Content) 5 points Does the memorandum use the correct analysis for each identified issue and thoroughly explain the analysis?

Application of Analysis to Facts (Evidence Evaluation) 5 points Does each analysis include all applicable facts?

Conclusion (Are conclusions appropriate based on evaluation and appropriate use of terminology) 5 points

Matt and Debra Pearson live in an upscale neighborhood in Orem, Utah. Matt is a partner in the family owned automotive painting business. Debra stays home with their son, Brady, who is four.

After visiting with their financial planner, the couple became concerned that they were spending too much and not putting enough funds aside for Brady’s future educational needs. Matt earns $95,000 per year, but with the rising costs of education, they are concerned.

Matt is an alumni of the University of California at Los Angeles (UCLA) with tuition and book expenses of approximately $17,000 per year today. Debra graduated from Utah Valley University. The expense for tuition and books there is currently estimated at about $6,700 per year. When Brady turns 18, the couple wishes to send him to one of these two exceptional universities. They have a slight preference for Utah Valley University. The problem, however, is that with the rate at which tuition is increasing the Pearson’s are not sure they can save enough money and they have decided they do not want to borrow to pay for Brady’s education.

Assume the tuition at both universities will increase at an annual rate of 5% from now until Brady finishes college. Living expenses are currently estimated at $11,000 per year at both schools. This expense is expected to grow at only 2.5% per year. Further assume that Pearson’s can deposit their money into a growth oriented mutual fund at the Salt Lake City based mutual fund company which has historically earned 9.5% per annum.

The couple wishes to save by having a pre-determined amount automatically withdrawn from their bank account at the end each month. They plan to contribute from now until Brady starts college. When Brady starts college, at the beginning of his freshman year, they will stop making contributions. They want to have enough in their account to cover all four years of college expenses when Brady starts college. Assume that the funds in the account will continue to earn a return while he is in college. They will make annual withdrawals from the account to cover both tuition and living expenses for Brady at the beginning of his freshman, sophomore, junior, and senior years. When the withdrawal for the senior year is made the account balance will be zero.

Complete an analysis and write a professional letter to the Pearson’s (who don’t understand finance) explaining the analysis you performed, why you performed it, what the results are, and your recommendations. Use the provided rubric in preparing your letter. In the letter and attached schedules provide information that discusses and answers the following questions.

What will be the tuition expense, living expense, and total expense for each of the four years that Brady will attend college? Provide the information for each University.

What amount will be needed in the account when Brady starts his freshman year if he attends UCLA? What amount if he attends UVU?

How much money will Matt and Debra have to deposit at the end of each month to allow Brady to attend UCLA? How much money will have to be deposited per month to allow Brady to attend Utah Valley University? Assume that Matt and Debra stop making deposits when Brady starts college.

The Pearson’s are concerned that given the current market situation the mutual fund will only earn 7.5% per year. If the return is only 7.5% how much will be needed in the account when Brady starts college and how much will have to be deposited per month for Brady to have sufficient funds to attend each school?

2. Needs Assessment for Coastal Tool Rental

Kathleen Marsh is a recent community college graduate who plans to open an equipment and tool rental store in the next few months. The store will target do-it-yourselfers who need gardening and home improvement implements that may be too expensive to purchase for a limited project.

Although this is her first real venture as an entrepreneur, Kathleen worked in a tool rental shop during high school and college. Kathleen’s store, Coastal Tool Rental, will be in a new shopping center. Kathleen chose the location because a sizable community of family homes is nearby and because no major competition is located in the area, which is about 15 miles from the nearest large town. She has arranged to rent 2500 square feet of space in the shopping center. She has located a wholesaler who can provide her with a start-up inventory of common garden and home improvement implements. The wholesaler can also serve as a supplier for new and replacement tools, equipment, and consumables.

Kathleen majored in small business management, but she also took a number of computer- related courses as electives—including some classes on programming and on using word processing, spreadsheet, and database applications. Kathleen plans to purchase a desktop computer for use in her small business venture, but her start-up money and time are limited.

Kathleen is considering the following four options to keep track of equipment rentals:

1. A manual system of file cards for each piece of equipment and each customer

2. A computer-based system she would build using a spreadsheet or database application

3. A computer-based option she would program herself

4. An off-the-shelf software package designed for equipment renta

She has asked for your help to determine the feasibility of each of these options. Complete the following:

# First, prepare a list of interview questions for Kathleen that would help you make a recommendation to her.

# After you have a list of potential questions to ask in an interview, compare your questions with those of three classmates or coworkers. Work with your group to create one merged list of questions for Kathleen. Organize the questions under several main categories.

# When you have completed the list of interview questions, your instructor will provide you with Kathleen’s responses to several questions from an interview with her. Based on her responses, complete the following:

Briefly describe the pros and cons of the four options Kathleen is considering.

Based on what you know of Kathleen’s situation, which of the four options would you recommend to her? Explain your reasoning.

In order to implement one of these options, Coastal Tools Rental would need data on each rental item and each customer. List the fields you think Coastal would need to include in either a record for each rental tool or a record for each customer.