Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information.

Click here to view PV table.

(a)

Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to 0 decimal places, e.g. 125.)

(b)

Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.)

(c)

Compute the net present value of the commuter service. (Round answer to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Maria Gutierrez and Devin Duzan recently graduated from the same university. After graduation they decided not to seek jobs at established organizations but, rather, to start their own small business hoping they could have more flexibility in their personal lives for a few years. Maria’s family has operated Mexican restaurants and taco trucks for the past two generations, and Maria noticed there were no taco truck services in the town where their university was located. To reduce the amount they would need for an initial investment, they decided to start a business operating a taco cart rather than a taco truck, from which they would cook and serve traditional Mexican-styled street food.

They bought a used taco cart for $15,000. This cost, along with the cost for supplies to get started, a business license, and street vendor license brought their initial expenditures to $20,000. They took $5,000 from personal savings they had accumulated by working part time during college, and they borrowed $15,000 from Maria’s parents. They agreed to pay interest on the outstanding loan balance each month based on an annual rate of 4 percent. They will repay the principal over the next few years as cash becomes available. They were able to rent space in a parking lot near the campus they had attended, believing that the students would welcome their food as an alternative to the typical fast food that was currently available.

After two months in business, September and October, they had average monthly revenues of $20,000 and out-of-pocket costs of $16,000 for rent, ingredients, paper supplies, and so on, but not interest. Devin thinks they should repay some of the money they borrowed, but Maria thinks they should prepare a set of forecasted financial statements for their first year in business before deciding whether or not to repay any principal on the loan. She remembers a bit about budgeting from a survey of accounting course she took and thinks the results from their first two months in business can be extended over the next 10 months to prepare the budget they need. They estimate the cart will last at least five years, after which they expect to sell it for $5,000 and move on to something else in their lives. Maria agrees to prepare a forecasted (pro forma) income statement, balance sheet, and statement of cash flows for their first year in business, which includes the two months already passed.Page 535

Required

Prepare the annual pro forma financial statements that you would expect Maria to prepare based on her comments about her expectations for the business. Assume no principal will be repaid on the loan.

Review the statements you prepared for the first requirement and prepare a list of reasons why actual results for Devin and Maria’s business probably will not match their budgeted statements.

Assume you are 22 years old when you graduate from the University of Arizona and have a credit card of $2,000 credit balance with an 18% annual rate. If you only make minimun payments of 2% of the balance or just $10 (whichever is greater) each month , what birthday will you likely be celebrating when the credit card is paid off?

Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $36,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,450. They also found a three-bedroom home that would cost $136,000 to purchase. The Jacobys could use Meagan’s inheritance for a down payment on the home. Thus, they would need to borrow $100,000 to acquire the home. They have the option of paying two discount points to receive a fixed interest rate of 4.50 percent on the loan or paying no points and receiving a fixed interest rate of 5.70 percent for a 30-year fixed loan.

Though anything could happen, the couple expects to live in the home for no more than five years before relocating to a different region of the country. Derek and Meagan don’t have any school-related debt, so they will save the $36,000 if they don’t purchase a home. Also, consider the following information:

The couple’s marginal tax rate is 24 percent.

Regardless of whether they buy or rent, the couple will itemize their deductions.

If they buy, the Jacobys would purchase and move into the home on January 1, 2018.

If they buy the home, the property taxes for the year are $3,800.

Disregard loan-related fees not mentioned above.

If the couple does not buy a home, they will put their money into their savings account where they earn 5 percent annual interest.

Assume that all unstated costs are equal between the buy and rent option.

Required: Help the Jacobys with their decisions by answering the following questions: (Leave no answer blank. Enter zero if applicable.)

a If the Jacobys decide to rent the home, what is their after-tax cost of the rental for the first year (include income from the savings account in your analysis)? (Round your intermediate calculations to the nearest whole dollar amount.)

Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $36,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,450. They also found a three-bedroom home that would cost $136,000 to purchase. The Jacobys could use Meagan’s inheritance for a down payment on the home. Thus, they would need to borrow $100,000 to acquire the home. They have the option of paying two discount points to receive a fixed interest rate of 4.50 percent on the loan or paying no points and receiving a fixed interest rate of 5.70 percent for a 30-year fixed loan.

Though anything could happen, the couple expects to live in the home for no more than five years before relocating to a different region of the country. Derek and Meagan don’t have any school-related debt, so they will save the $36,000 if they don’t purchase a home. Also, consider the following information:

The couple’s marginal tax rate is 24 percent.

Regardless of whether they buy or rent, the couple will itemize their deductions.

If they buy, the Jacobys would purchase and move into the home on January 1, 2018.

If they buy the home, the property taxes for the year are $3,800.

Disregard loan-related fees not mentioned above.

If the couple does not buy a home, they will put their money into their savings account where they earn 5 percent annual interest.

Assume that all unstated costs are equal between the buy and rent option.

Required: Help the Jacobys with their decisions by answering the following questions: (Leave no answer blank. Enter zero if applicable.)

rev: 12_18_2018_QC_CS-151658

a. If the Jacobys decide to rent the home, what is their after-tax cost of the rental for the first year (include income from the savings account in your analysis)? (Round your intermediate calculations to the nearest whole dollar amount.)

Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $36,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,450. They also found a three-bedroom home that would cost $136,000 to purchase. The Jacobys could use Meagan’s inheritance for a down payment on the home. Thus, they would need to borrow $100,000 to acquire the home. They have the option of paying two discount points to receive a fixed interest rate of 4.50 percent on the loan or paying no points and receiving a fixed interest rate of 5.70 percent for a 30-year fixed loan.

Though anything could happen, the couple expects to live in the home for no more than five years before relocating to a different region of the country. Derek and Meagan don’t have any school-related debt, so they will save the $36,000 if they don’t purchase a home. Also, consider the following information:

The couple’s marginal tax rate is 24 percent.

Regardless of whether they buy or rent, the couple will itemize their deductions.

If they buy, the Jacobys would purchase and move into the home on January 1, 2018.

If they buy the home, the property taxes for the year are $3,800.

Disregard loan-related fees not mentioned above.

If the couple does not buy a home, they will put their money into their savings account where they earn 5 percent annual interest.

Assume that all unstated costs are equal between the buy and rent option.

Required: Help the Jacobys with their decisions by answering the following questions: (Leave no answer blank. Enter zero if applicable.)

rev: 12_18_2018_QC_CS-151658

a. If the Jacobys decide to rent the home, what is their after-tax cost of the rental for the first year (include income from the savings account in your analysis)? (Round your intermediate calculations to the nearest whole dollar amount.)

Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $36,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,450. They also found a three-bedroom home that would cost $136,000 to purchase. The Jacobys could use Meagan’s inheritance for a down payment on the home. Thus, they would need to borrow $100,000 to acquire the home. They have the option of paying two discount points to receive a fixed interest rate of 4.50 percent on the loan or paying no points and receiving a fixed interest rate of 5.70 percent for a 30-year fixed loan.

Though anything could happen, the couple expects to live in the home for no more than five years before relocating to a different region of the country. Derek and Meagan don’t have any school-related debt, so they will save the $36,000 if they don’t purchase a home. Also, consider the following information:

The couple’s marginal tax rate is 24 percent.

Regardless of whether they buy or rent, the couple will itemize their deductions.

If they buy, the Jacobys would purchase and move into the home on January 1, 2018.

If they buy the home, the property taxes for the year are $3,800.

Disregard loan-related fees not mentioned above.

If the couple does not buy a home, they will put their money into their savings account where they earn 5 percent annual interest.

Assume that all unstated costs are equal between the buy and rent option.

Required: Help the Jacobys with their decisions by answering the following questions: (Leave no answer blank. Enter zero if applicable.)

a. If the Jacobys decide to rent the home, what is their after-tax cost of the rental for the first year (include income from the savings account in your analysis)? (Round your intermediate calculations to the nearest whole dollar amount.)

b. What is the approximate break-even point in years for paying the points to receive a reduced interest rate? (To simplify this computation, assume the Jacobys will make interest-only payments, and ignore the time value of money.) (Do not round intermediate calculations. Round your final answer to 1 decimal place.)

c. What is the after-tax cost (in interest and property taxes) of living in the home for 2018? Assume that the Jacobys' interest rate is 5.70 percent, they do not pay discount points, they make interest-only payments for the first year, and the value of the home does not change during the year. (Round your intermediate calculations to the nearest whole dollar amount.)

d. Assume that on March 1, 2018, the Jacobys sold their home for $159,000, so that Derek and Meagan could accept job opportunities in a different state. The Jacobys used the sale proceeds to (1) pay off the $100,000 principal of the mortgage, (2) pay a $10,000 commission to their real estate broker, and (3) make a down payment on a new home in the different state. However, the new home cost only $75,000. Assume they make interest-only payments on the loan.

  Required:

d1. What gain or loss do the Jacobys realize and recognize on the sale of their home?

d2. What amount of taxes must they pay on the gain, if any?

e. Assume the same facts as in part (d), except that the Jacobys sell their home for $124,500 and they pay a $7,500 commission. What effect does the sale have on their 2018 income tax liability? Recall that the Jacobys are subject to an ordinary marginal tax rate of 24 percent and assume that they do not have any other transactions involving capital assets in 2018.

The University of Arkansas recently approved out of state tuition discounts for high school students from any state. The students must qualify by meeting certain standards in terms of GPA and standardized test scores. The goal of this new policy is to increase the geographic diversity of students from states beyond Arkansas and its border states. Historically, 90% of all new students came from Arkansas or a bordering state. Ginger, a student at the U of A, sampled 180 new students the following year and found that 157 of the new students came from Arkansas or a bordering state. Does Ginger’s study provide enough evidence to indicate that this new policy is effective with a level of significance 10%? What would be the correct decision?

Que: Researcher Anne Case from Princeton University wrote of “Deaths of Despair”. In the research she combines the suicide epidemic and the opioid epidemic: “When looking at the suicide and death rates of middle-aged whites, the authors wrote: “It is also a crisis in which people are killing themselves in much larger numbers - especially whites. Deaths from alcohol have been rising as well. So we think of it all being signs that something is really wrong and whatever it is that's really wrong it's happening nationwide… They don't have a good job. They don't have a marriage that supports them. They may have children that they do or don't see. They have a much more fragile existence than they would have had a generation ago ... it may be the deaths from drugs, from suicide, from alcohol are related to the fact that people don't have the stability and a hope for the future that they might have had in the past.”

For this question, you are to become Durkheim and explain why we see each of these results. Remember to focus on the idea of social bonds. Which of Durkheim’s 4 types of suicide is represented by this data? Explain your choices.

(Answer need to be in Soft copy Only)

Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information.

1. Five used vans would cost a total of $74,970 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation.

2. Ten drivers would have to be employed at a total payroll expense of $48,000.

3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,000, Maintenance $3,600, Repairs $4,000, Insurance $4,300, and Advertising $2,700.

4. Lon has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital.

5. Lon expects each van to make ten round trips weekly and carry an average of six students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12 for a round-trip ticket. Click here to view PV table.

a)

Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to 0 decimal places, e.g. 125.)

Net income    $

Net annual cash flows    $

(b)

Compute(1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.)

Cash payback period    years

Annual rate of return %

(c)

Compute the net present value of the commuter service. (Round answer to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value

Derek and Meagan Jacoby recently graduated from State University and Derek accepted a job in business consulting while Meagan accepted a job in computer programming. Meagan inherited $75,000 from her grandfather who recently passed away. The couple is debating whether they should buy or rent a home. They located a rental home that meets their needs. The monthly rent is $2,250. They also found a three-bedroom home that would cost $475,000 to purchase. The Jacobys could use Meagan’s inheritance for a down payment on the home. Thus, they would need to borrow $400,000 to acquire the home. They have the option of paying 2 discount points to receive a fixed interest rate of 4.50 percent on the loan or paying no points and receiving a fixed interest rate of 5.75 percent for a 30-year fixed loan.

Though anything could happen, the couple expects to live in the home for no more than five years before relocating to a different region of the country. Derek and Meagan don’t have any school-related debt, so they will save the $75,000 if they don’t purchase a home. Also, consider the following information:

• The couple’s marginal tax rate is 24 percent.
• Regardless of whether they buy or rent, the couple will itemize their deductions.
• If they buy, the Jacobys would purchase and move into the home on January 1, 2018.
• If they buy the home, the property taxes for the year are $3,600.
• Disregard loan-related fees not mentioned above.
• If the couple does not buy a home, they will put their money into their savings account where they earn 5 percent annual interest.
• Assume that all unstated costs are equal between the buy and rent option.

Required: Help the Jacobys with their decisions by answering the following questions: (Leave no answer blank. Enter zero if applicable.)

a. If the Jacobys decide to rent the home, what is their after-tax cost of the rental for the first year? (include income from the savings account in your analysis.)

b. What is the approximate break-even point in years for paying the points to receive a reduced interest rate? (To simplify this computation, assume the Jacobys will make interest-only payments, and ignore the time value of money.) (Do not round intermediate calculations. Round your final answer to 1 decimal place.)

c. What is the after-tax cost (in interest and property taxes) of living in the home for 2018? Assume that the Jacobys' interest rate is 5.75 percent, they do not pay discount points, they make interest-only payments for the first year, and the value of the home does not change during the year.

d. Assume that on March 1, 2018, the Jacobys sold their home for $525,000, so that Derek and Meagan could accept job opportunities in a different state. The Jacobys used the sale proceeds to (1) pay off the $400,000 principal of the mortgage, (2) pay a $10,000 commission to their real estate broker, and (3) make a down payment on a new home in the different state. However, the new home cost only $300,000. Assume they make interest-only payments on the loan.

Required:

1. d1. What gain or loss do the Jacobys realize and recognize on the sale of their home?
2. d2. What amount of taxes must they pay on the gain, if any?

Anna Sheen, upon graduating from a Boston-area university with a degree in journalism and operations research, returned to her hometown of Hamptonshire, Pennsylvania, to start a daily newspaper. The Hamptonshire Express emphasized local news, which Sheen believed was not adequately covered by big-city newspapers such as the The Philadelphia Inquirer, Pittsburgh Post-Gazette, and The New York Times.

Working in leased space that cost approximately $10 per day, Sheen wrote stories and articles daily around news and feature material that she gathered from around town, and then typeset the newspaper using desktop software. A local printer printed the newspapers overnight at a marginal cost of $0.20 per copy. Anna sold the copies the following morning from 6 a.m. to 10 a.m. from a newsstand at the intersection of Main Street and Center Street in the center of Hamptonshire. Newsstand rental was $30 per day. Express was sold to consumers for $1 per copy. Copies not sold by 10 a.m. were discarded.

Demand for newspapers was unpredictable; Sheen estimated demand daily before delivering the typeset paper to the printer. Based on data from similar entrepreneurial ventures and interviews with potential Hamptonshire customers, she estimated that daily demand for the Express was normally distributed with a mean of 500 and standard deviation of 100.

a. How many newspapers should Sheen stock (i.e., order from the printer)? What is the profit at this stocking quantity?

b. Verify that the value derived in part (a) is consistent with the optimal stocking quantity in the Newsvendor model using excel: Q*= µ + Normsinv(Cu/Cu+Co))σ

*Please show work

If you understand the meanings of many words, you can be said to have a "good vocabulary." Words are the basis of thought. We think with words, we understand words, and we communicate with words.

A large vocabulary is a significant asset. It allows us to use precise words that say exactly what we intend. In addition, we understand more effectively what we hear and read. A large vocabulary also enables us to score well on employment and intelligence tests. Lewis M. Terman, who developed the Stanford-Binet IQ tests, believed that vocabulary is the best single indicator of intelligence.

In the business world, where precise communication is extremely important, surveys show a definite correlation between vocabulary size and job performance. Skilled workers, in the majority of cases, have larger vocabularies than unskilled workers. Supervisors usually know the meanings of more words than the workers they direct, and executives generally have larger vocabularies than employees working for them.  

Having a good vocabulary at our command doesn't necessarily ensure our success in life, but it certainly gives us an advantage. Improving your vocabulary will help you expand your options in an increasingly complex world.  

Vocabulary can be acquired in three ways: accidentally, incidentally, and intentionally. Setting out intentionally to expand your word power is, of course, the most efficient vocabulary-building method.  In addition, with all of the technology and tools at our disposal, such as the Internet, Siri, Wikipedia, Dictionary.com, it is easy to look up and expand our vocabulary daily.

Why might it be of value to intentionally expand your vocabulary? Explain.