Medtronic Inc., the world's largest manufacturer of implantable biomedical devices, reported earnings per share in 2017 of $3.95 and paid dividends per share of $0.68.    Its earnings are expected to grow by 16% in 2018 and in 2019; the growth rate is expected to decline each year after that to a stable growth rate of 6% in 2021.    The payout ratio is expected to remain unchanged from 2017 to 2019, after which it will increase each year to reach 50% in steady state. The stock is expected to have a beta of 1.25 from 2018 to 2019, after which the beta would decline each year to reach 1.00 by the time the firm becomes stable. The treasury bond rate is 1.25% and the equity risk premium is 5.5%.

(i)Assuming that the growth rate declines linearly (and the payout ratio increases linearly) from 2020 to 2021, estimate the dividends per share each year from 2018 to 2021.

(ii)Estimate the expected price at the end of 2021.

(iii)Estimate the value per share, using the three-stage dividend discount model.

Question 1
Balances of account for Chin Chai Smartshop as at 31 December 2010 are shown below:
RM
Cash 800
Debtors 5,800
Creditors 9,940
Stocks as at 1 January 2010 5,985
Insurance 360
Office equipment at cost 8,000
Provisions for depreciation for office equipment 800
Import duty 540
Commission received 1,580
Vehicles at cost 12,000
Provisios for depreciation for vehicles 1,200
Return inwards 780
Return outwards 695
Purchases 39,950
Sales 67,575
Bank 13,600
Discount received 420
Discount allowed 485
Salary and wages 3,930
General expenses 425
Rental received 7,800
Vehicles maintenance 1,350
Drawings 675
Bad debts 150
Provision for doubtful debts 225
Shop building 35,000
Maintenance of shop building 300
Capital ?








Additional information:
1) Stock as at 31 December valued at RM5,995.
2) Office equipment and vehicles will be depreciated at 10% per annum using reducing balance method.
3) Provisions for doubtful debts were adjusted at 3% on total debtors.
4) Drawings of cash amounting RM420 for personal used has not been recorded in any books of accounts yet.
5) Accrued commission received is RM55.
6) Part of the shop was rental out to third party at agreed rate of RM600 per month.
7) Salary and wages was underpaid for the month of December by RM1,600.

Required:

a) Calculate the capital amount as at the date.                                                        

b) Income Statement for the year ended 31 December 2010.                               

c) Balance sheet as at the date.                                                                            
(Total: 25 Marks)

On December 31, 2013, the Mallory Corporation had the following activity in its fixed assets

record. Assume all assets were purchased on January 1.

REQUIRED:

· Compute the depletion, amortization, and depreciation expense on December 31, 2013 for each asset listed above.

· Record the entries for the assets above

· Suppose that we sold machine 2 for $50,000, record the entry

· Suppose that the building life increased from 25 years to 30 years, revise the depreciation and prepare the entry.

· Suppose that the corporation spent $20,000 in 2013 to defend the patent.  Record the entry.

Use this information for New Tech Company to answer the following question. You may (or may not) need to fill in missing information.

          NEW TECH COMPANY

INDUSTRY AVERAGE RATIOS

Which of the following items characterize New Tech Company? (It may be more than one option).

EXPLAIN (and report your calculations) (15 points)

1. High debt & unprofitable
2. Low debt & unprofitable
3. Decreasing profit margin
4. High Asset Utilization Performance
5. Low Asset Utilization Performance
6. Increasing sales with a decreasing sales growth rate
7. 1, 3 and 5 characterize New Tech Company

In 2009, New York First National Bank acquired New Jersey National Bank. In an exchange, New York First National Bank issued three series of preferred stock for New Jersey National Bank's net assets. Series Senior A (the most senior series), was given to four of New Jersey National Bank's creditors so that the debt could then be retired. The four preferred shareholders are listed as follows: two regional banks, one money center bank, and a non-financial corporation. Senior Series A has a total par value of $20 million, which carries a non-cumulative dividend per the following schedule:

New York First National Bank did not pay dividends in 2010, 2011, or 2013 however, they will start paying dividends annually at the start of 2014 thus, they will pay 20% on the Senior Series A preferred.

The Senior Series A stock may be called at any given time, at par plus dividends cumulated from January 1, 2010. New York First National Bank estimates that it can float a new issue of 10% non-cumulative preferred stock at par, with issuance costs amounting to $1,000,000. The new issue of preferred would be callable at par plus unpaid dividends.

Should New York First National Bank call in the Senior Series A and issue new preferred? (assume that the Senior Series A would be called effective December 31, 2013.)

3. Inflation a) What is the difference between real and nominal GDP? _______________________________________________________________ _______________________________________________________________

b) Suppose the base year is 2005, and the only goods in the economy are apples and bananas. In 2005 both apples and bananas cost $1, and 100 apples and 100 bananas are produced. In 2006, apples cost $20 and bananas cost $5, and 50 apples and 200 bananas are produced.

1. What is nominal GDP in 2005? _______ In 2006? _______ 2. What is real GDP in 2005? _______ In 2006? _______

3. What is the GDP deflator in 2005? _______ In 2006? _______

4. Suppose the fixed basket of goods is 1 apple and 2 bananas. 5. What is the level of the CPI in 2005? _______ In 2006? _______ 6. What is the CPI inflation rate from 2005 to 2006? _______

c) What are the three effects that bias the measurement of CPI? i. _____________________ ii. _____________________ iii. _____________________

d) Which of the three effects listed in part c does each of the following illustrate? 1. US households in 2010 spent a larger fraction of their income on televisions than they did in 1950. __________________________ 2. All televisions available in 2010 had higher resolution than any televisions available in 1950. __________________________ 3. In 1950, no US household had a plasma screen television, but in 2010 they are widely available. __________________________

e) Suppose the average television purchased in 1950 cost $200, and the average television purchased today costs $700.

1. What is the percentage change in the average television price? _______

2. Taking into account the effects in part c, is this percentage increase likely an underestimate or overestimate of the true change in the cost of televisions? ____________

3. Why? ____________________________________________________

More time on the Internet: A researcher polled a sample of 1097 adults in the year 2010, asking them how many hours per week they spent on the Internet. The sample mean was 9.42 with a standard deviation of 13.23. A second sample of 1031 adults was taken in the year 2012. For this sample, the mean was 10.63 with a standard deviation of 14.47. Assume these are simple random samples from populations of adults. Can you conclude that the mean number of hours per week spent on the Internet increased between 2010 and 2012? Let μ1 denote the mean number of hours spent on the Internet in 2010 and μ2 denote the mean number of hours spent on the Internet in 2012. Use the =α0.05 level and the P-value method with the table. Part 1 of 6 Your Answer is correct State the appropriate null and alternate hypotheses. H0:=μ1μ2 H1:<μ1μ2 This is a ▼left-tailed test. Part 2 of 6 Your Answer is correct Compute the test statistic. Round the answer to three decimal places. =t −2.01 Part 3 of 6 Your Answer is incorrect How many degrees of freedom are there, using the simple method? The degrees of freedom using the simple method is 1.646. Correct Answer: The degrees of freedom using the simple method is 1030. Part: 3 / 63 of 6 Parts Complete Part 4 of 6 Estimate the P-value. Identify the form of the interval based on Critical Values for the Student's t Distribution Table. ≤p <≤p >p

Mark spent $80 to buy 10 cans of beer (good X) and 5 bottles of wine (good Y) last week. Each can of beer cost Px and each bottle of wine cost Py. Suppose he is a utility maximizing agent.

1. Now, the price of one bottle of beer has increased by $1 and he has spent the same amount of money to buy 8 cans of beer and 5 bottles of wine. Find the price of beer before the change and the price of wine.

2. What is the MRS before the price change and after the price change?

At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $18,400 and accumulated E&P of $24,250 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $24,250 distribution (the remaining shareholders received $36,375 in distributions). (Assume her stock basis is $48,500 after considering her share of Bombay’s income for the year but before considering the effects of the distribution.)

Required:

1. What is the amount and character of gain Nicolette must recognize from the distribution?
2. What is her basis in her Bombay stock at the end of the year?

A clinical trial was conducted to test the effectiveness of a drug for treating insomnia in older subjects. Before​ treatment,

2323

subjects had a mean wake time of

100.0100.0

min. After​ treatment, the

2323

subjects had a mean wake time of

74.674.6

min and a standard deviation of

20.920.9

min. Assume that the

2323

sample values appear to be from a normally distributed population and construct a

9999​%

confidence interval estimate of the mean wake time for a population with drug treatments. What does the result suggest about the mean wake time of

100.0100.0

min before the​ treatment? Does the drug appear to be​ effective?