October 1993 Marriott Corporation announced
plans to divide its operations into two separate
businesses (spin off of hotel mgt’ business)

– Marriott International: manage Marriott’s hotel chain and receive most of the revenue

– Host Marriott: own all the company’s real estate and be responsible for servicing essentially all of the old company’s $3 billion of debt

What will happen to Marriott’s stock price and
bond price after this announcement?

You are considering a hotel purchase. The current purchase price is $ 3,000,000. The bank is willing to finance 70% of the purchase price for 20 years in quarterly installments at 8% per annum mortgage nominal rate. What is the balloon payment you will have to pay, if you want to resell the hotel after 10 years? Consider a fully amortizing fixed rate mortgage.

a)      $ 0

b)      $ 1,445,395

c)       $ 1,669,270

d)      $ 1,981,333

At year-end (December 31), Chan Company estimates its bad debts as 0.40% of its annual credit sales of $879,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $440 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare the journal entries for these transactions.

Required information

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In January 2017, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $854,000, with a useful life of 20 years and a $90,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $427,000 that are expected to last another 14 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,769,000. The company also incurs the following additional costs:

2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2017.

In a survey of 3,827 ​travelers, 1,459 said that location was very important for choosing a hotel and 1,175 said that reputation was very important in choosing an airline. Complete parts ​(a) through​ (c) below.

a. Construct a 95​% confidence interval estimate for the population proportion of travelers who said that location was very important for choosing a hotel.

b. Construct a 95​% confidence interval estimate for the population proportion of travelers who said that reputation was very important in choosing an airline.

c. Write a short summary of the information derived from​ (a) and​ (b) Which of the following is the best summary of the information derived from​ (a)?

A.One can be 95​% confident that the sample proportion of all travelers who said that location was very important for choosing a hotel lies within the interval in​ (a).

B.One can be 95​% confident that the population proportion of all travelers who said that location was very important for choosing a hotel lies within the interval in​ (a).

C.There is a 95​% probability that the sample proportion of all travelers who said that location was very important for choosing a hotel lies within the interval in​ (a).

D.There is a 95% probability that the population proportion of all travelers who said that location was very important for choosing a hotel lies within the interval in​ (a).

Which of the following is the best summary of the information derived from​ (b)?

A.One can be 95​% confident that the population proportion of all travelers who said that reputation was very important in choosing an airline lies within the interval in​ (b).

B.One can be 95​% confident that the sample proportion of all travelers who said that reputation was very important in choosing an airline lies within the interval in​ (b).

C.There is a 95​% probability that the sample proportion of all travelers who said that reputation was very important in choosing an airline lies within the interval in​ (b).

D.There is a 95​% probability that the population proportion of all travelers who said that reputation was very important in choosing an airline lies within the interval in​ (b).

Black Mountain Ski Resort has been granted a 20 - year permit to develop and operate a skiing operation in a national park. After 20 years the site must be returned to its original condition. The roads may remain, as they can be used for fire prevention purposes. In the spring and summer before the ski hill opened, the following transactions and events occurred:

You must use the following Long-Lived asset accounts

Ski Lift

Ski Chalet

Land improvement

Roads

Parking lot

1. Installed three ski lifts for a total cost of $150,000,000. It is estimated that the scrap metal from the lifts could be sold for $4,000,000 at the end of 20 years.
2. Built a Ski chalet for $70,000,000
3. Removed Trees and cleared the area for ski runs at a cost of $40,000,000
4. Received $ 10,000,000 for the trees that were removed for the ski runs.
5. Put in roads for a cost of $50,000,000.
6. Paved an area at the base of the mountain for a parking lot at a cost of $10,000,000.
7. Estimated that it would cost $20,000,000 to dismantle the ski lifts in 20 years. The chalet could be removed for a cost of $15,000,000. Re-foresting the site would cost $5,000,000. Removing the parking lot will cost $3,000,000. Calculate the PV of Site Restoration using a risk rate of 6% and provide the journal entry.

8. Using Straight Line Depreciation record the depreciation for the first year of operations on the Long-Lived assets and site restoration costs. Put all the depreciation expense in one account and then create accumulated depreciation accounts for each asset that requires depreciation.

9. Allocate the interest expense on the site restoration costs for the first three years

10. Using the table below prepare the balance sheet presentation of all the accounts involved in this question for the end of the third year of operations.

    	Cost	Accumulated Depreciation	Net Carrying Amount
    Property Plant and Equipment
    Ski Lift
    Ski Chalet
    Land Improvement
    Roads
    Parking Lot
    Site Restoration Costs
    Total Property Plant and Equipment

    Long Term Liabilities

    Obligation for future restoration =

11. At the end of the project the actual cost of restoring the site is $43,000,000, as originally estimated. Prepare the journal entry to record the payment of these costs at the end of the project

    Date	Explanation/ Account	Debit	Credit

    what would be the total expenses associated with the site restoration in the first, second and 20^th year?

    Year	Depreciation of Site Restoration Costs	Interest expense accrual on obligation for future site restoration	Total Expense relating to site restoration
    1
    2
    20

    Calculations

You are in charge of a manufacturing firm that is contracted to manufacture molds for producing jewelry for a leading retail store. Your firm did a market assessment last year for 200k to determine what is involved in producing the molds, and have received a total of 100k over the past two years in contract work similar to this. This new contract that you just signed pays you to produce 50 simple jewelry designs, and 5 complex jewelry designs. Your internal costs to do designs are: 518.2 in material for each mold (simple or complex) 198.48 in labor costs for each simple mold $523.1 in labor costs for each complex mold A fixed overhead cost of $200 per mold for the simple designs and $500 per mold for the complex designs In addition, the complex molds require an artist who you have to hire for $113.52 per hour to process the molds. You can assume that the average complex part requires 10 hours of labor per mold. If the contract pays you 100k for this, what is the net profit of the contract? Type this answer in the box below. If you repeat this operation each year and your costs stay the same (i.e. as above) for 5 years, but the contract price increases by 10k per year, what is the present worth of this situation over the 5 years if your cost of capital is 5%?

The mean area of homes in a certain city built in 2009 was 2438 square feet. Assume that a simple random sample of 11 homes in the same city in 2010 had a mean area of 2,295 squarefeet, with a deviation of 225 square feet. An insurance company wants to know if the mean area of homes built in 2010 is less than that of homes built in 2009.

Bethesda Mining is a mid-sized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip minds. Most of the coal mined is sold under contract, with excess production sold on the spot market.The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda has been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next 4 years. Bethesda Mining does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in Ohio on 5,000 acres of land purchased 10 years ago for $4 million. Based on a recent appraisal, the company feels it could receive $6.5 million on an after-tax basis if it sold the land today.Strip Mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, Bethesda will need to purchase additional necessary equipment, which will cost $95 million. The equipment will be depreciated on a 7-year MACRS schedule. The contract runs for only 4 years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60% of its initial purchase price in four years. The contract calls for the delivery of 500,000 tons of coal per year at a price of $86 per ton. Bethesda Mining feels that coal production will be 620,000 tons, 680,000 tons, 730,000 tons, and 590,000 tons, respectively, over the next four years. The excess production will be sold in the spot market at an average of $77 per ton. Variable costs amount to $31 per ton, and fixed costs are $4,100,000 per year. The mine will require a net working capital investment of 5% of sales. The NWC will be built up in the year prior to the sales. Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in Year 5. The company uses an outside company for reclamation of all the company’s strip minds. It is estimated the cost of reclamation will be $2.7 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation to the state for use as a public park and recreation area. This will occur in Year 6 and result in a charitable expense deduction of $6 million. Bethesda faces a 25% tax rate and has a 12% required return on new strip mine projects. Assume that a loss in any year will result in a tax credit.You have been approached by the president of the company with a request to analyze the project. Calculate the NPV, IRR for the new strip mine. Should Bethesda Mining take the contract and open the mine?