1. In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket consists of 15 hot dogs and 8 hamburgers. A hot dog cost $2.25 in 2006 and $5.40 in 2007. A hamburger cost $5.75 in 2006 and $7.86 in 2007. Calculate the CPI for both years and then find the inflation rate.

2. In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 25 sandwiches and 40 magazines. In 2006, a sandwich cost $4.50 and a magazine cost $3.99. In 2007, a sandwich cost $5.75. If the inflation rate in 2007 was 21 percent, then how much did a magazine cost in 2007?

3. When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $525.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $699.00. What is the OVERALL rate of inflation for Anders' gym membership?

4. In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 12 in 1949, 96 in 1987, and 117.5 in 2000. Calculate the value of the courthouse in 2000 dollars and the value of the hospital in 2000 dollars and compare your answers. Which one cost more?

5. Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 156 in 2001 and 227.25 in 2006. What is Ruben's 2006 salary in 2001 dollars? What does this mean about how his purchasing power increased or decreased?

Locate the balance sheet of a publicly-traded corporation online in its annual report (10-K) and answer the following questions:

What were the total current assets this year and last year for the company you chose?

What were the total current liabilities this year and last year for the company you chose?

Calculate the Current Ratio for this year and last year for the company you chose.

Analyze your company's current ratio (is it good/bad; how does it compare to the prior year, etc.) Include a link to the URL from which you located the company's annual report

In much of Asia and Latin America, companies that are parts of family groups comprise a large percentage of publicly traded companies. From a corporate governance standpoint, which of the following would concern you the most at these companies?

• A. They will make decisions that are in the best interests of the family group, rather than in the best interests of the company
• B. They will pay out too much in dividends.
• C. They will make decisions that are in the best interests of the company, rather than in the best interests of the family group.
• D. They will be too aggressive, in seeking out growth and investments.
• E. They will not borrow enough money to fund operations.

Evaluating Turnover and Nontraditional Efficiency Ratios Across Industries
The following information is taken from publicly traded retailers. The data come from the balance sheet, income statement, and Item 2 on the companies’ Form 10‑K filings. Use the information to answer the requirements.

Required

a. Compute the days inventory outstanding (DIO) for each company.
Note: Do not round until your final answer; round your final answer to the nearest whole day.

b. Compute the gross profit margin for each company.
Note: Round percentage to one decimal place (for example, enter 6.7% for 6.6555%).

c. Compute the following two nontraditional efficiency metrics: Revenue per square foot and Revenue per store.
Note: Round your answers to two decimal places (for example, enter 6.78 for 6.77555).

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Your audit team is reviewing the second quarter financial statements of Sparks, Inc., a publicly traded company. The audit senior, Will, thinks the client may have omitted an important item and has asked you to research whether interim financial statements are required to include earnings per share amounts. Prepare an email responding to Will’s question. Comment on any other potential ramifications of Sparks, Inc.’s omission that come to mind, which you can offer to research.

Integrative—Risk

and Valuation   Hamlin Steel Company wishes to determine the value of Craft​ Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the​ constant-growth valuation model. ​ Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly​ traded, Hamlin believes that an appropriate risk premium on Craft stock is about

8​%.

The​ risk-free rate is currently

5​%.

​ Craft's dividend per share for each of the past 6 years is shown in the following​ table:

LOADING...

.

a. Given that Craft is expected to pay a dividend of

​$2.82

next​ year, determine the maximum cash price that Hamlin should pay for each share of Craft. ​(Hint: Round the growth rate to the nearest whole​ percent.)

b. Describe the effect on the resulting value of Craft​ from:

​(1) A decrease in its dividend growth rate of​ 2% from that exhibited over the

2014​-2019

period.

​(2) A decrease in its risk premium to

7​%.

THE TABLE

2019   2.66
2018   2.51
2017   2.37
2016   2.23
2015   2.11
2014   1.99

Integrative—Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft​ Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the​ constant-growth valuation model. ​ Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly​ traded, Hamlin believes that an appropriate risk premium on Craft stock is about 9%. The​ risk-free rate is currently 6​%.

Craft's dividend per share for each of the past 6 years is shown in the following​ table:

2019   $2.85
2018   $2.69
2017   $2.54
2016   $2.39
2015   $2.26
2014   $2.13

a. Given that Craft is expected to pay a dividend of $3.023.02 next​ year, determine the maximum cash price that Hamlin should pay for each share of Craft. ​(Hint: Round the growth rate to the nearest whole​ percent.)

b. Describe the effect on the resulting value of Craft​ from:

​(1) A decrease in its dividend growth rate of​ 2% from that exhibited over the 2014​-2019 period.

​(2) A decrease in its risk premium to 8​%.

Integrative-long dashRisk and Valuation: Hamlin Steel Company wishes to determine the value of Craft​ Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the​ constant-growth valuation model. ​ Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly​ traded, Hamlin believes that an appropriate risk premium on Craft stock is about 9​%. The​ risk-free rate is currently 5​%. ​ Craft's dividend per share for each of the past 6 years is shown in the following​ table: LOADING.... a. Given that Craft is expected to pay a dividend of ​$3.28 next​ year, determine the maximum cash price that Hamlin should pay for each share of Craft. ​(Hint: Round the growth rate to the nearest whole​ percent.) b. Describe the effect on the resulting value of Craft​ from: ​(1) A decrease in its dividend growth rate of​ 2% from that exhibited over the 2014​-2019 period. ​(2) A decrease in its risk premium to 8​%. Data: 2019 $3.15 2018 $3.03 2017 $2.92 2016 $2.80 2015 $2.70 2014 $2.59

Integrative -- Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant-growth valuation model. Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate risk premium on Craft stock is about 8%. The risk-free rate is currently 4%. Craft's dividend per share for each of the past 6 years is shown in the following table:

Year. Dividend Per Share.

2019. $3.52

2018. $3.38

2017. $3.25

2016. $3.13

2015. $3.01

2014. $2.89

a. Given that Craft is expected to pay a dividend of $3.66 next year, determine the maximum cash price that Hamlin should pay for each share of Craft. (Hint: Round the growth rate to the nearest whole percent.)

b. Describe the effect on the resulting value of Craft from:

(1) A decrease in its dividend growth rate of 2% from that exhibited over the 2014-2019 period.

(2) A decrease in its risk premium to 7%.

In the year in which it intends to go public, a firm has revenues of $20 million and net income after taxes of $2 million. The firm has no debt, and revenue is expected to grow at 20% annually for the next five years and 5% annually thereafter. Net profit margins are expected remain constant throughout. Capital expenditures are expected to grow in line with depreciation and working capital requirements are minimal. The average beta of a publicly traded company in this industry is 1.50 and the average debt/equity ratio is 20%. The firm is managed very conservatively and does not intend to borrow through the foreseeable future. The Treasury bond rate is 6% and the tax rate is 40%. The normal spread between the return on stocks and the risk free rate of return is believed to be 5.5%. Reflecting the slower growth rate in the sixth year and beyond, the firm’s discount rate is expected to decline to the industry average cost of capital of 10.4%. Estimate the value of the firm’s equity.