Brodrick Company expects to produce 20,400 units for the year ending December 31. A flexible budget for 20,400 units of production reflects sales of $571,200; variable costs of $61,200; and fixed costs of $144,000.

QS 23-3 Flexible budget LO P1

If the company instead expects to produce and sell 27,200 units for the year, calculate the expected level of income from operations.

QS 23-4 Flexible budget performance report LO P1

Assume that actual sales for the year are $713,600 (27,200 units), actual variable costs for the year are $114,000, and actual fixed costs for the year are $134,000.

Prepare a flexible budget performance report for the year.

The following data are available for Sellco for the fiscal year ended on January 31, 2017:

Required:

a. Calculate cost of goods sold and ending inventory under the cost flow assumptions, FIFO, LIFO and Weighted average (using a periodic inventory system): (Round unit cost to 2 decimal places.)

b. Assume that net income using the weighted-average cost flow assumption is $14,500. Calculate net income under FIFO and LIFO. (Round unit cost to 2 decimal places.)

Calculate the present value of $1 million paid at the end of every year in perpetuity,

assuming a rate of return of 10% and a constant growth rate of 6%.

An extraction from the balance of payments for the current year shows that your country has undergone a deterioration in its net international investment position. Suppose you are part of the policy analysts discussing the pros and cons of such a change, what would be your arguments?

Assume that dividends in the next three years (starting from year 2017) will grow at a rate of 13% annually. Further, it is assumed that dividends will grow at a rate of 11% for the next four years (year 4 to 7). Thereafter it is assumed that the company will grow at a constant growth rate of 7% per annum. The last dividend paid (for 2016) is $1.52. Assume a required rate of return of 12%.

Clearly show the following:

Present Value of First Stage

Present Value of Second Stage

Present Value with constant growth rate

Stock Intrinsic Value

At the beginning of its fiscal year 2020, an analyst made the following forecast for ABC, Inc. (in millions of dollars):

Suppose these numbers were given to you at the end of 2019, as forecasts, when the book value was 890 million, as indicated and market price of the stock was $10.5 per share. Use a required return of 10 percent for calculations below. Show your working process.

1. Calculate residual earnings and return of common equity (ROCE) for each year, 2020–2024.                                                                                      

[5 marks]

2. Value the firm at the end of 2019 under the assumption that the RE in 2024 will continue at the same level subsequently.                                                            

[2 marks]

3. Based on you analysis, if the number of shares outstanding at the end of 2019 was 220 million, what should be the share price of ABC?                                      

[1 mark]

4. Based on your estimate, should investors buy the share of this company?          

[1 mark]

On the last day of the fiscal year, a co-worker asks you to cut a check for $2,000 as a miscellaneous expense for supplies in order to complete a project for a VIP customer today. You notice the invoice looks a little different from other invoices that are usually processed. You know that by preparing the closing entries tomorrow, the miscellaneous expense will be set to zero for the beginning of the year. Should you write this check today and record the expense or write the check tomorrow? How would the company be affected if the check is written and the invoice ends up being erroneous?

Dollar Return on Foreign Investments -

(A) Over the past year, the dollar has depreciated by about 10 percent against the euro. A year ago you took out a home equity loan in the U.S. at an interest rate of 8 percent and you invested the money in a German mutual fund that paid a 5 percent euro return. What net return did you earn on all of these transactions over the year? (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM).

(B) Over the past year, the dollar has appreciated by about 8 percent against the peso. A year ago you borrowed in the U.S. at an interest rate of 4 percent and you invested the money in a Mexican mutual fund that paid a 12 percent peso return. What net return did you earn on all of these transactions over the year? (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM).

A stock expects to pay a dividend of $3.72 per share next year. The dividend is expected to grow at 25 percent per year for three years followed by a constant dividend growth rate of 4 percent per year in perpetuity. What is the expected stock price per share 5 years from today, if the required return is 12 percent?

A property is forecasted to generate annual rental income of $110,000 in year Vacancy rate is expected to be 5%, there is also a 5% management fee. Other operating expenses will total $19,000 for year 1. Rent is expected to grow at 8% in years 2 and 3, and other operating expenses are expected to grow at 5% in years 2 and 3. You believe that you can sell the property at the end of year 3 for $1,220,000. Using a required rate of return of 9%, calculate a fair value of the property today (at t=0).