Abby, a single taxpayer, purchased 10,000 shares of § 1244 stock several years ago at a cost of $20 per share. In November of the current year, Abby received an offer to sell the stock for $12 per share. She has the option of either selling all of the stock now or selling half of the stock now and half of the stock in January of next year. Abby will receive a salary of $80,000 for the current year and $90,000 next year. Abby will have long-term capital gains of $8,000 for the current year and $10,000 next year.

If Abby's goal is to minimize her AGI for the two years, determine whether she should sell all of her stock this year or half of her stock this year and half next year.

a. Determine Abby's total AGI under both options for the current year and next year.

If an amount is zero, enter "0".

Articulation Exercise

Listed below are selected account balances for Moby Corporation at December 31, Year 2 and Year 1. Also available for you is selected information from the income statement for Moby for the year ended December 31, Year 2.

Selected balance sheet accounts:       Year 2                                       Year 1

Assets:

Accounts Receivable                           $18                                           $22

Prepaid Salaries                                     8                                              7

Prepaid Rent                                         3                                              5

Property, Plant & Equipment                310                                           283

(Accumulated Depreciation)                (75)                                          (68)

Investments                                         26                                             24

Liabilities & Stockholders’

Equity:

Salaries Payable                                   12                                              9

Unearned Sales Rev.                              4                                              1

Notes Payable                                     39                                             34

Dividends Payable                                 6                                              4

Contributed Capital                              32                                             24

Retained Earnings                                42                                             39

Selected income statement information for the year ended December 31, Year 2:

Sales revenue                                     $74

Depreciation                                       18

Salaries Expense                                  27

Gain on sale of equipment                       7

Loss on sale of investments                     3

Net Income                                         21

Additional information:

1. During Year 2, Property, Plant & Equipment costing $26 was sold causing a gain.
2. During Year 2, $22 of Notes Payable were issued in exchange for Property, Plant and Equipment. This involves an exchange of Notes Payable for Property, Plant and Equipment.
3. During Year 2, the firm sold Investments for $8 cash.

Required: Determine the correct dollar amounts for each of the following items. Place your answers in the spaces provided.

1. Cash paid for salaries in Year 2.                                                                  $_________                                              
2. Payments for the purchase of Investments in Year                                        $_________           

3. Notes Payable paid off in Year 2.                                                                 $_________                                                           

4. Cash dividends paid in Year 2                                                                     $_________                      
5. Cash received from the sale of Property, Plant and Equipment in Year 2              $_________                                                           
6. Cash paid for Property, Plant & Equipment in Year 2                                      $_________           

7. Cash collected from customers in Year 2                                                         $_________

Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian consumer market. The company’s current assets, current liabilities, and sales over the last five years (Year 5 is the most recent year) are as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Sales $ 4,500,090 $ 4,903,310 $ 5,148,110 $ 5,529,910 $ 5,632,260 Cash $ 88,312 $ 103,640 $ 102,980 $ 86,199 $ 83,505 Accounts receivable, net 404,988 431,050 442,486 500,081 567,716 Inventory 804,331 872,355 823,816 886,170 914,938 Total current assets $ 1,297,631 $ 1,407,045 $ 1,369,282 $ 1,472,450 $ 1,566,159 Current liabilities $ 317,437 $ 336,296 $ 343,679 $ 323,620 $ 390,799 Required: 1. Express all of the asset, liability, and sales data in trend percentages. Use Year 1 as the base year. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian consumer market. The company’s current assets, current liabilities, and sales over the last five years (Year 5 is the most recent year) are as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Sales $ 4,500,090 $ 4,903,310 $ 5,148,110 $ 5,529,910 $ 5,632,260 Cash $ 88,312 $ 103,640 $ 102,980 $ 86,199 $ 83,505 Accounts receivable, net 404,988 431,050 442,486 500,081 567,716 Inventory 804,331 872,355 823,816 886,170 914,938 Total current assets $ 1,297,631 $ 1,407,045 $ 1,369,282 $ 1,472,450 $ 1,566,159 Current liabilities $ 317,437 $ 336,296 $ 343,679 $ 323,620 $ 390,799 Required: 1. Express all of the asset, liability, and sales data in trend percentages. Use Year 1 as the base year. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) problem is filled as: sales in percents current assets accounts receivable as % Inventory % total Current Assets % current Liabilites%  

THE ANSWER THAT IS ALREADY ON THIS SITE IS WRONG

Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian consumer market. The company’s current assets, current liabilities, and sales over the last five years (Year 5 is the most recent year) are as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Sales $ 4,500,090 $ 4,903,310 $ 5,148,110 $ 5,529,910 $ 5,632,260 Cash $ 88,312 $ 103,640 $ 102,980 $ 86,199 $ 83,505 Accounts receivable, net 404,988 431,050 442,486 500,081 567,716 Inventory 804,331 872,355 823,816 886,170 914,938 Total current assets $ 1,297,631 $ 1,407,045 $ 1,369,282 $ 1,472,450 $ 1,566,159 Current liabilities $ 317,437 $ 336,296 $ 343,679 $ 323,620 $ 390,799 Required: 1. Express all of the asset, liability, and sales data in trend percentages. Use Year 1 as the base year. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian consumer market. The company’s current assets, current liabilities, and sales over the last five years (Year 5 is the most recent year) are as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Sales $ 4,500,090 $ 4,903,310 $ 5,148,110 $ 5,529,910 $ 5,632,260 Cash $ 88,312 $ 103,640 $ 102,980 $ 86,199 $ 83,505 Accounts receivable, net 404,988 431,050 442,486 500,081 567,716 Inventory 804,331 872,355 823,816 886,170 914,938 Total current assets $ 1,297,631 $ 1,407,045 $ 1,369,282 $ 1,472,450 $ 1,566,159 Current liabilities $ 317,437 $ 336,296 $ 343,679 $ 323,620 $ 390,799 Required: 1. Express all of the asset, liability, and sales data in trend percentages. Use Year 1 as the base year. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) problem is filled as: sales in percents current assets accounts receivable as % Inventory % total Current Assets % current Liabilites%

Question 5: Which of the following contracts has the most price risk? The most reinvestment risk?

7-year bond with a 5% coupon

1-year bond with a 12% coupon

3-year bond with a 5% coupon

15-year zero coupon bond

15-year bond with a 10% coupon

Calculate the annual cash flows of a $100,000, 10-year fixed-payment deferred annuity earning a guaranteed 3.6 percent per year if annual payments are to begin at the end of year 4 (beginning of year 5). (Hint: Grow the original investment for 4 years and then all payments are paid at the beginning of the year.)

What is next year's dividend or D1 if the dividend growth rate in year 1 is 25%, in year 2 is 15%, and in year 3 is 10%. After year 3 the dividend is expected to grow at a constant rate of 6% indefinitely. The required return is 12% per year, while the current stock price is $27.94

The firm Gelati-Banking (GB) is considering a project with the following characteristics. Sales will be $100 MM for sure in the first year and grow 10% in the second year; thereafter, the long term growth rate is 3%. Gross Profit Margin (Gross Profit over Sales) will be 20%. Depreciation will be $10 MM each year for the next two years. Working Capital held for the project will have to be 10% of sales. Additional CAPX each year will be $11MM in year 1 and $12 MM in year 2. All cash flows defined here are deterministic and will go on indefinitely. Interest rates are as follows: 3-month t-bill is 3%, the 2 year treasury is 4% and the long bond (30-year) is trading at 5% per year. The Corporate Tax Rate is 40%. What would the investment need to be for this project to be breakeven (ignoring depreciation effects of the investment)? Assume that 1) Everything grows at 3% per year from year 2 onwards to infinity; and 2) The cash flow stream that goes from time 0 on indefinitely is similar in nature to a long term treasury bond.

Problem 2: Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: Variable costs per unit: Manufacturing: Direct materials $ 25 Direct labor $ 18 Variable manufacturing overhead $ 3 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 320,000 Fixed selling and administrative expenses $ 90,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $54 per unit.

Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses absorption costing: a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.