Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 years, and the shareholders are satisfied with the company’s management. Prior to founding Stephenson Real Estate, Robert was the founder and CEO of a failed alpaca farming operation. The resulting bankruptcy made him extremely averse to debt financing. As a result, the company is entirely equity financed, with 9 million shares of common stock outstanding. The stock currently trades at $37.80 per share.

Stephenson is evaluating a plan to purchase a huge tract of land in the southeastern United States for $95 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson’s annual pretax earnings by $18.75 million in perpetuity. Jennifer Weyand, the company’s new CFO, has been put in charge of the project. Jennifer has determined that the company’s current cost of capital is 10.2 percent. She feels that the company would be more valuable if it included debt in its capital structure, so she is evaluating whether the company should issue debt to entirely finance the project. Based on some conversations with investment banks, she thinks that the company can issue bonds at par value with a 6 percent coupon rate. From her analysis, she also believes that a capital structure in the range of 70 percent equityy30 percent debt would be optimal. If the company goes beyond 30 percent debt, its bonds would carry a lower rating and a much higher coupon because the possibility of financial distress and the associated costs would rise sharply. Stephenson has a 40 percent corporate tax rate (state and federal).

1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain.

2. Construct Stephenson’s market value balance sheet before it announces the purchase.

3. Suppose Stephenson decides to issue equity to finance the purchase.

What is the net present value of the project?

Construct Stephenson’s market value balance sheet after it announces that the firm will finance the purchase using equity. What would be the new price per share of the firm’s stock? How many shares will Stephenson need to issue to finance the purchase?

Construct Stephenson’s market value balance sheet after the equity issue but before the purchase has been made. How many shares of common stock does Stephenson have outstanding? What is the price per share of the firm’s stock?

Construct Stephenson’s market value balance sheet after the purchase has been made.

4. Suppose Stephenson decides to issue debt to finance the purchase. What will the market value of the Stephenson company be if the purchase is financed with debt?

Construct Stephenson’s market value balance sheet after both the debt issue and the land purchase. What is the price per share of the firm’s stock?

5. Which method of financing maximizes the per-share stock price of Stephenson’s equity?

X Corporation appropriately uses the installment-sales method of accounting to recognize income in its financial statements. The following information is available for 2020 and 2021.

Business Law
1) United Express is spending several Million dollars on an advertising campaign about how environmentally responsible the company is. the ads showcase the company's new all electric fleet of delivery vans. The CEO of United Express is negotiating with several airlines for the purchase of used passenger jets that will be converted by carry backage. the problem is that these 20-30 year old aircraft pollute ten times more than newer modern jets. Does United Express have an ethical issue to deal with? briefly explain.

Read over the scenario. Prepare a decision memo for approval. Any clarifications (how many senior staff, how many helpdesk etc.) should be posted within the Discussion Board.

You are the CIO of a Startup called Kitnip. Currently there are 20 employees supporting 500 customers in the Sacramento area. If the market share is gained, total employees could balloon to 300 in the next 5 years in accounting, marketing, customer support and other administrative areas. Your business is in connecting individuals with cats with individuals who want to change their cat litter…for money. Coupled with a plant-based, non-scented litter and other cat related toys and accessories that are sold direct to consumer in an online store. All litter changers are 1099 employees and thus not included in the expansion or the rest of this analysis.

Your startup just received a Series C funding, where you are now tasked to become a more stable company with standardization. Your CEO and President Harry Cat understands the importance of standardization, but depends upon your expertise. He wants to know what he should budget to give you to ensure you have the equipment and technology to “get everyone on the same page”. His criteria for determining viability are: mobility (prefers lightweight), costs, and aesthetics (looks nice). Due to the startup nature there is little standardization in platform or policy, with the exception of G Suite basic is purchased for all employees, however beyond email little else is utilized.

Your initial analysis boils down to what should Kitnip provide its employees to conduct business and is G Suite basic enough. Things like operating system, monitor, laptop, phone, BYOD software, BYOD reimbursement could be considered for a employee devices. Is G Suite Basic enough to also provide backups, collaborative capabilities and productivity software?

Harry Cat has asked for a SHORT (no more than 2 pages w/o figures) decision memo stating in simple terms what is needed, why, and a dollar amount by year. Any anticipated questions should be included in appendices with charts, figures, or forecasts. Comparing costs to an alternate solution is suggested.

Write a decision memo:

I. Background & Current Status: What is the background for reaching this decision memo? Where is the company and the department at in the process?

II. Impact and Evaluation: What is the impact to the organization should a decision not be reached? Why do we need to make this decision now? What other factors could be involved for not coming to a decision? What key factors are we using to make the evaluation?

III. Options: What are the options that we will choose from? Why did you choose them? How can it mitigate the issues forecasted in section II?

IV. Analysis/Discussion: Conduct an analysis of the options against your critieria. Discuss why one or two is better than the others. (If you do a Matrix, if you run out of space put it in the back)

V. Recommendation: Bottom Line. What do you recommend, why, how much?

the construction activity for the year-end 31 December 2020, are as follows:

Required:

1) Prepare a schedule by project, showing clearly the amount of gross profit (loss) of the project before deducting selling, general, and administrative expenses for the year ended 31 December 2020 using the percentage-of-completion method. (based on estimated costs.)

2)Based on the schedule, show the amount of gross profit ( or loss) before selling, general, and administrative expenses for the year ended 31 December 2020, which would be reported if the following method are used:

(I) the cost-recovery method.

(II) The percentage-of-completion method ( based on estimated costs)

3) Prepare all the necessary general journal entries for the project AB for the financial year 2020, using the percentage-of-completion method.

Numbers 12 and 13 On January 1, 2020, an entity sold a new car at a price of P1,300,000 with production cost of P1,170,000. At the time contract signing, the entity received P130,000 cash and old car as down payment. The entity gave a trade-in allowance of P390,000 to the old car although its fair market value on January 1, 2020 is P650,000. The remaining balance is payable in six equal monthly installments starting February 1, 2020. The buyer religiously paid the monthly installments starting February 1, 2020. However, on June 1, 2020, the buyer defaulted on the monthly installment due which is resulted to the cancellation of the contract of sale and repossession of the subject car. At the date of the repossession, the repossessed car was appraised at a fair value of P169,000. It is the policy of the entity to use installment method to account its credit sales.

12. What is the realized gross profit to be recognized by the entity for the year ended December 31, 2020?

13. What is the loss on repossession to be recognized by the entity for the year ended December 31, 2020?

Elements of the Income Statement for Hofstadter Experiments Ltd. follow:

Highlights of the Balance Sheet:

Required: (Round all answers to 2 decimal places).

1. Calculate the gross profit rate for both 2019 and 2020.
2. Did the gross profit rate improve or worsen from 2019 to 2020?
3. What was the Accounts Receivable Turnover ratio for 2020?
4. Explain what Accounts Receivable Turnover is in your own words.
5. What was the Return on Common Shareholders’ Equity for 2020?
6. What was the Current Ratio for 2020?
7. Is the current ratio calculated in f) adequate?

Elements of the Income Statement for Hofstadter Experiments Ltd. follow:

Highlights of the Balance Sheet:

Required:   (Round all answers to 2 decimal places).

1. Calculate the gross profit rate for both 2019 and 2020.
2. Did the gross profit rate improve or worsen from 2019 to 2020?
3. What was the Accounts Receivable Turnover ratio for 2020?
4. Explain what Accounts Receivable Turnover is in your own words.
5. What was the Return on Common Shareholders’ Equity for 2020?
6. What was the Current Ratio for 2020?
7. Is the current ratio calculated in f) adequate?

On 15 June 2020 Great Hall Pty Ltd reestablishes the account of one customer and records the collection of $2,200 in full payment of the account that had previously been written off. The present balance of the allowance for doubtful debts account is $1,000 CR.

After the above adjustment, Great Hall Pty Ltd assigns the following probability of uncollectible to each age group of receivables as at 30 June 2020 in the below table.

Required:

1. In the table above, estimate the total uncollectible receivables as at 30 June 2020.

Provide journal entries to record the recovery of the bad debt on 15 June 2020, and adjust the closing balance of the allowance for doubtful debts account on 30 June 2020.