Golden Manufacturing Company started operations by acquiring $150,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $120,000 cash, had an expected useful life of five years, and had an estimated salvage value of $4,000. Golden Manufacturing earned $72,000 and $83,000 of cash revenue during Year 1 and Year 2, respectively. Golden Manufacturing uses double-declining-balance depreciation.

What is Golden's straight line rate?

What is the Depreciation Expense for Year 1?

What is Net Income for Year 1?

What is the Book Value of the equipment at the end of Year 1?

What are the Cash Flows from Operating Activities for Year 1?

What is the Depreciation Expense for Year 2?

What is Net Income for Year 2?

What is the book value of the equipment at the end of Year 2?

What are the Cash Flows from Operating Activities for Year 2?

1. Suppose the data on today’s and future expected interest rates is given:

a) Calculate today’s interest rates on 2-year, 3-year and 4-year bonds using the expectations hypothesis. Use these yields to construct a yield curve and plot it. What kind of shape does it have?

b) Now, suppose term premiums for 2-year, 3-year and 4-year bonds are 0.2%, 0.3% and 0.4%, respectively. Recalculate today’s interest rates on 2-year, 3-year and 4-year bonds using the liquidity premium theory. Use the yields to plot the yield curve on the same graph as expectations hypothesis yield curve from part (a). What do you notice?

1. Develop a valuation model for a corporate bond with a par value at maturity of $1,000, a maturity of 20 years, a coupon interest rate of 7%, and a yield to maturity of 4%. The coupons are assumed to be paid semi-annually. In your development and presentation, include a time line showing the relevant cash flows along with all of the steps that allow you to generate the value (price of the bond).
2. Given the problem above, identify how the bond price will be expected to adjust across time as the bond approaches maturity. You should calculate the price after each 2-year period has passed – i.e., after year 2, year 4, year 6, year 8, year 10, year 12, year 14, year 16, year 18, and year 20. Graph the resulting movement in the price across time using the resulting values. Explain how this movement in the bond price across time is important for the investor.

How long will it take $400 to double if it earns the following rates? Compounding occurs once a year. Round your answers to two decimal places. 6%. year(s) 15%. year(s) 20%. year(s) 100%. year(s)?

How long will it take $700 to double if it earns the following rates? Compounding occurs once a year. Round your answers to two decimal places.

1. 7%.

   year(s)

2. 11%.

   year(s)

3. 18%.

   year(s)

4. 100%.

   year(s)

How long will it take $100 to double if it earns the following rates? Compounding occurs once a year. Round each answer to two decimal places.

6%.= year(s)

9%.= year(s)

21%. = year(s)

100%= . year(s)

1. following yield curve

And that the FRA (1 year, starting two year from now) is 4%

1. Calculate the implicit 1 year interest rate that we are expecting for next year and next next year

ONLY QUESTION 3 - PLEASE PROVIDE DETAILED INSTRUCTIONS

Quality Improvement and Profitability Objective

Gagnon Company reported the following sales and quality costs for the past four years. Assume that all quality costs are variable and that all changes in the quality cost ratios are due to a quality improvement program.

Required:

1. Compute the quality costs for all four years.

By how much did net income increase from Year 1 to Year 2 because of quality improvements?
$

By how much did net income increase from Year 2 to Year 3 because of quality improvements?
$

By how much did net income increase from Year 3 to Year 4 because of quality improvements?
$

2. The management of Gagnon Company believes it is possible to reduce quality costs to 2 percent of sales. Assuming sales will continue at the Year 4 level, calculate the additional profit potential facing Gagnon.
$

Is the expectation of improving quality and reducing costs to 2 percent of sales realistic?
Yes

3. Assume that Gagnon produces one type of product, which is sold on a bid basis. In Years 1 and 2, the average bid was $400. In Year 1, total variable costs were $240.00 per unit. In Year 3, competition forced the bid to drop to $320.00.
Do not round the intermediate calculations and round your final answers to the nearest dollar.

Compute the total contribution margin in Year 3 assuming the same quality costs as in Year 1.
$

Now, compute the total contribution margin in Year 3 using the actual quality costs for Year 3.
$

What is the increase in profitability resulting from the quality improvements made from Year 1 to Year 3?
$