1. The director of sport marketing of your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose between the following: (1) a 15-year sponsorship paying $100,000 per year; (2) a 15-year sponsorship initially paying $75,000 per year and increasing 5% each year; and (3) a 15-year sponsorship initially paying $45,000 per year, but increasing 12% each year. Based on this information, address the following:
   1. Determine the value of each year for each proposal, as well as the total value of each proposal. Hint: you should have a table that has 3 columns (one for each proposal) and is 16 rows high (one for each of the 15 years and one at the bottom that is a total of all 15 years).
   2. Which proposal should the marketing director choose and why?

You are considering buying a new​ car, because you think it will save you money. Your think your old car will cost​ $2,200 in gas and maintenance next year​ (Year 1), and you expect that to increase by​ 6% every year until the end of Year 10. A new car will cost you​ $16,500 now​ (Year 0). You think it will cost​ $500 in gas and maintenance next year​ (Year 1), and you expect that to increase by​ 4% every year until the end of Year 10. You need to decide if the new car is worth the investment. Assume an annual interest rate of​ 5% a. What is the equivalent present value of the maintenance costs of the old​ car? b. What is the equivalent present value of the maintenance costs of the new​ car? c. Is the new car worth the​ investment?

IBM (US) needs to raise $100 or an equivalent in foreign currency to fund its operations in New York. It can issue a 3-year maturity Japanese yen bond at par, coupon rate 1% per annum. The current exchange rate is ¥85/$. Alternatively, it can issue the 3-year Eurodollar bond at par, with 3% coupon per year.

You forecast the future exchange rates as follows:
Year 1 - ¥92
Year 2 - ¥98
Year 3 - ¥107

The Bank has quoted the following forward rates for the yen/$ exchange rate:
Year 1 - ¥82
Year 2 - ¥80
Year 3 - ¥77

Assume that the market interest rates are 1% (Japan) and 3% (US) flat for the next three years. Which bond is cheaper for IBN to issue? Covered Bond or Uncovered Bond? Why? Show All Calculations.

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 3% stock, $20 par and 400,000 shares of $25 par common.

During its first four years of operations, the following amounts were distributed as dividends: first year, $30,000; second year, $74,000; third year, $100,000; fourth year, $120,000.

Determine the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0.00".

Feedback

Is the preferred stock cumulative or non-cumulative stock? Determine what amoun

15-11 Equity Method for Stock Investment

On January 4, Year 1, Ferguson Company purchased 72,000 shares of Silva Company directly from one of the founders for a price of $48 per share. Silva has 200,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $194,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $647,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva.

a. Provide the Ferguson Company journal entries for the transactions involving its investment in Silva Company during Year 1.

b. Determine the December 31, Year 1, balance of Investment in Silva Company Stock.

$

need answers for all 4 years in all three sections

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $77,760. The equipment was expected to have a useful life of three years, or 7,560 operating hours, and a residual value of $2,160. The equipment was used for 1,400 hours during Year 1, 2,600 hours in Year 2, 2,300 hours in Year 3, and 1,260 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-output method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.

A machine costing $257,500 with a four-year life and an estimated $20,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 475,000 units of product during its life. It actually produces the following units: 220,000 in 1st year, 124,600 in 2nd year, 121,800 in 3rd year, 15,200 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

Required

Prepare a table with the following column headings and compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.

Check Year 4: units-of-production depreciation, $4,300; DDB depreciation, $12,187

Preparing Income Statements by Using Net Sales as the Base: Vertical Analysislt Jasmine Company provided the following income statements for its first 3 years of operation:

Year 1 Year 2 Year 3

Net sales $5,000,000 $4,500,000 $4,000,000

Less: Cost of goods sold (3,000,000) (3,250,000) (3,600,000)

Gross margin $2,000,000 $1,250,000 $400,000

Less: Operating expenses (1,420,000) (800,000) (165,000)

Income taxes (232,000) (180,000) (134,000)

Net income $348,000 $270,000 $101,000

Required: Prepare common-size income statements by using net sales as the base. Round answers to the nearest whole percentage.

Jasmine Company Income Statement

Year 1 dollars Year 1 percent Year 2 dollars Year 2 percent Year 3 dollars Year 3 percent $ % $ % $ % $ $ $ $ $ $

Assume that the real risk-free rate of return, r*, is 1%, and it will remain at that level far into the future. Also assume that maturity risk premium on Treasury bonds increase from zero for bonds that mature in one year or less to a maximum of 2%, and MRP increases by 0.2% for each year to maturity that is greater than one year – that is, MRP equals 0.2% for two-year bond, 0.4% for a three-year bond, and so forth. Following are the expected inflation rates for the next five years:

Compute the interest rate for 1, 2, 3, and 4-year bond.

If inflation is expected to equal 3% every year after 2021, what should the interest rate be for 5- through 20-year bond?

Draw a graph of the yield curve.

ou are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $400 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $35,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. (Use SL depreciation table)