Knowledge Check 01
At January 1, Year 1, Edwards Company issued 10,000 stock options permitting employees to buy 10,000 shares of stock for $50 per share. The vesting schedule (graded-vesting) and value of the options that vest over the 3-year period is estimated at January 1, Year 1, as set forth in the following table.

What is the compensation cost for Year 1 relating to these stock options? (Do not use the straight-line method.)

You're a contractor who needs to lease space for a field office during the five years of a construction project. The owner of the building where you want to rent space offers you three lease options. Each option assumes payment at the beginning of each year, and i=4% per year. which option would you chose?

A) First year annual rent of $12,000, with an increase of $2,500 per year for each of the next four years

B) First year annual rent of $12,000, with an increase of 18% per year for each of the next four years

C) Constant rent of $16,900 per year for five years.

*please solve arithmetically and not with excel*

14. A study has shown that a good model for the relationship between X and Y , the first and second year batting averages of a randomly chosen major league baseball player, is given by the equation Y = .159 + .4X + e, where e is a normal random variable with mean 0. That is, the model is a simple linear regression with a regression toward the mean.

(a) If a player’s batting average is .200 in his first year, what would you predict for the second year?

(b) If a player’s batting average is .265 in his first year, what would you predict for the second year?

(c) If a player’s batting average is .310 in his first year, what would you predict for the second year?

Anything in business - pathway

Locate the most recent balance sheet of a publicly-traded corporation in your pathway. You can find the balance sheet within the annual report (10-K). Answer the following questions:

1. What is the name of your company and your pathway?
2. What were the total current assets this year and last year for the company you chose?
3. What were the total current liabilities this year and last year for the company you chose?
4. Calculate the Current Ratio for this year and last year for the company you chose.
5. Analyze your company's current ratio (is it good/bad; how does it compare to the prior year, etc.)
6. Include a link to the URL for your company's annual report.

On July 1 of year 1, Elaine purchased a new home for $890,000. At the time of the purchase, it was estimated that the property tax bill on the home for the year would be $17,800 ($890,000 × 2%). On the settlement statement, Elaine was charged $8,900 for the year in property taxes and the seller was charged $8,900. On December 31, year 1 Elaine discovered that the real property taxes on the home for the year were actually $18,800. Elaine wrote a $18,800 check to the local government to pay the taxes for that calendar year (Elaine was liable for the taxes because she owned the property when they became due). What amount of real property taxes is Elaine allowed to deduct for year 1? (Assume not married filing separately.)

In Year 1, Citradoria Corporation is a regular corporation that contributes $35,000 cash to qualified charitable organizations during the current tax year. The corporation has net operating income of $145,000, before deducting the contributions, and dividends received from domestic corporations (ownership in all corporations is less than 20 percent) in the amount of $25,000. A. In Year 2, Citradoria contributes $5,000 to charitable organizations. The corporation has net operating income of $150,000 before deducting the contributions, and no dividend income. What is the amount of Citradoria’s allowable deduction for charitable contributions for Year 2? $ B. If there is any carryover of the charitable contribution deduction from Year 2, what year will it expire (e.g., Year 3)?

ABC Ltd is considering an investment of $210,000 in a project that will generate revenues of $400,000 at the end of the first year, $300,000 at the end of the second year and $600,000 at the end of the third year. The expenses of the project are as follows: $250,000 in the first year, $120,000 in the second year and $300,000 in the third year. Additional to the revenue and expenses Working Capital of $150,000 is needed throughout the project. The tax rate is 30%, and tax laws allow the investment to be depreciated over three years, even though the investment has a useful life of three years. Should ABC engage the investment with a required rate of return of 15% (assume all cash flows occur at the end of the year)? – Use both NPV and IRR calculations.

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.

The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are spread over time to reflect delayed benefits. Each year is independent of the others.
  

The expected value for all three years is $80.

Compute the standard deviation for each of the three years. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $275,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:

Required:
Calculate inventory amounts at the end of each year. (Round intermediate calculations and final answers to the nearest whole dollars.)