Discos plc is negotiating an export contract with a customer in a developing country, Xeridia. Discos have not exported to the country before, and is concerned both about the risk of late or non-payment for the exports, and about the foreign exchange risks associated with the Xeridian peso. The contract specifies that Discos should receive 55 million Xeridian pesos in three months’ time. Discos will require short-term finance for the full value of the exports.

Exchange rates (peso/£)

Spot 32·34 – 32·89

3 months forward 33·82 – 34·55

6 months forward 35·17 – 35·90

Current short-term UK interest rates available to Discos plc:

Borrowing 6·5%

Investing 5·3%

Discos is considering to protecting against the foreign trade risk through forward market hedge. An insurance policy is available at a cost of 1·25% of the spot Sterling equivalent of the export value. The policy gives the following protection: 95% cover against non-payment as a result of political actions by a foreign government; 90% cover against other nonpayment. Any payment by the insurer would be after six months.

Discos have been advised that there is at least a 5% chance of late payment after six months or default by the client. The Xeridian government is not expected to take any action that is detrimental to foreign trade during the next six months.

Required:

Discuss the one advantage and a disadvantage of the alternative. State clearly any assumptions that you make.

Compute the expected returns if Discos defaulted

Events after the reporting period ★LO6

Cat Ltd operates a fleet of fishing trawlers. The following events took place after the end of the reporting period, 30 June 2019, but before the date the accounts were authorised, 15 September 2019.

On 17 July 2019, Cat Ltd’s main fishing fleet was sunk during a freak storm. Insurance will cover the replacement of the vessels but lost sales representing $550 000 in profits are not covered.

On 19 July 2019 Cat Ltd took delivery of a fishing net for its prawn trawler. The net was purchased from a UK manufacturer on delivered duty paid shipping terms and was in transit at the end of the reporting period. An inspection of the net revealed significant structural flaws and the net was returned to the supplier on 28 July 2019. Cat Ltd is to receive a full refund of the $650 000 purchase price which had been paid in advance on 29 June 2019.

On 29 August 2019 a lawsuit was lodged against the company by the families of crew members drowned in the 17 July storm, alleging negligence, and claiming $4 million in damages. No date has as yet been set for the court hearing.

On 1 September 2019 the directors resolved to issue to the public 10 000, 5% debentures of $10 each, payable $5 on application and $5 on allotment.

Required

Classify each event as an adjusting or non-adjusting event after the end of the reporting period. Explain your decisions.

Chapter 7:  

Central University of Illinois has a newly appointed president, Catherine Husker. This has been a challenging budget year due to the difficulties of getting a state budget passed in the State Legislature. It appears from all reports that the budget that may get passed will be only 90% of last year’s state appropriations for the University. This means the University will have to cut their own operating budget for next year because of the State’s expected reduction in appropriations to higher education.

Husker just had a meeting with the athletic director of the university, Gareth Connor, to discuss the budget for the athletic department. Central University has been a men’s football and basketball powerhouse for the last several decades. However, the women’s athletic program has had less success. Last year, though, the women’s basketball team was one of the team’s selected to participate in the NCAA Women’s Basketball Competition through an “at-large bid” due to their outstanding season.

Connor and Husker discussed the 2018 Athletic Department budget, which Connor believed was the final draft. The meeting did not go well. In fact, it went terribly.   Husker discussed four grave concerns she had about the Athletic Department budget and requested Connor to review and revise the budget in light of her concerns below. Draft II of the budget is due in two weeks time.

Concern 1: The Athletic Department is budgeting a loss of over $3 million. Given the tight fiscal position of the university, this outcome is unacceptable to Husker. A budgeted loss of $1 million is the most she will tolerate for 2018. By 2019 the Athletic Department has to operate with a balanced budget. She tells Connor this is nonnegotiable.

Concern 2: The low allocation of money to the women’s athletic program. Fox Valley News, a tabloid television show, recently ran a program titled “It’s a Man’s World at Central University Athletics’ Program.” Husker said Connor is treating woman athletes as “third-class citizens.”

Concern 3: The low academic performance of the men’s football athletes, many of whom have full scholarships. She notes that the local TV news recently ran an interview with three football-team students, only one of which “exemplified the high academic credentials she wants Central to showcase to the world.” As for the other two students, she calls one student “incoherent” and another “incapable of stringing sentences together.”

Concern 4: The outrageous salary paid to “Bull” Mason, the football coach. She notes it is twice that of the highest paid academic person on campus, a Nobel Prize winner. Moreover, Mason receives other payments from his “Football the Central Way” summer program for high school students.

Below is Draft I of the Athletic Department budget:

Central University 2017 Athletic Department Budget ($ millions)

Revenues:

         Men’s athletic programs                    $10.350

         Women’s athletic programs                   0.780

         Other (endowment income, gifts)           3.400      $14.530

Costs:

         Men’s athletic programs                    $11.040

         Women’s athletic programs                   2.800

         Other (non-assigned to programs)*         3.700      17.540

Operating Income                                                        $( 3.010)

*Other non-assigned programs include rugby, soccer and volleyball

Men’s Athletic Programs:

                           Football      Basketball       Swimming             Other       Total

Revenues              $8.600        $1.500            $0.100    $0.150   $10.350

Costs                    7.400            2.700              0.300      0.640     11.040

Full Scholarships         37                         21                 6                4       68

Women’s Athletic Programs:

                                             Basketball       Swimming             Other       Total

Revenues                                $0.600            $0.080    $0.100   $ 0.780

Costs                                        1.800              0.200      0.800       2.800

Full Scholarships                            11                 4                2       17

REQUIRED:

Connor will be holding a half-day meeting with key officials of the Athletic Department (of which your team are some of these key officials) to discuss the university president’s concerns. In order for your team of officials to be prepared to discuss the concerns of the president at this meeting, please answer the following questions prior to the meeting.

Questions:

Who are the stakeholders? (Worth 4 pts.)

The Athletic Department is operating at a loss. What are some of the ways the Department can increase revenues? Are there any potential pitfalls or problems with any of your ideas? (Worth 6 pts.)

Are there any ways that the Athletic Department can decrease costs? Are there any potential pitfalls or problems with any of these suggestions? (Worth 6 pts.)

What are some of the gender issues that Husker raised and how would you attempt to address them? (Worth 4 pts.)

2.58 Companies of the world

Refer to Exercise 1.118 (page 61), where we examined data collected by the World Bank on the numbers of companies that are incorporated and listed on their country's stock exchange at the end of the year. In Exercise 2.10, you examined the relationship between these numbers for 2012 and 2002, and in Exercise 2.27, you found the correlation between these two variables.

INCCOM

1. Find the least-squares regression equation for predicting the 2012 numbers using the 2002 numbers.
2. Sweden had 332 companies in 2012 and 278 companies in 2002. Use the least-squares regression equation to find the predicted number of companies in 2012 for Sweden.
3. Find the residual for Sweden.

Item 1

In the case below, the original source material is given along with a sample of student work. Determine the type of plagiarism by clicking the appropriate radio button.

Which of the following is true for the Student Version above?

Word-for-Word plagiarism

Paraphrasing plagiarism

This is not plagiarism

Hints

Item 2

In the case below, the original source material is given along with a sample of student work. Determine the type of plagiarism by clicking the appropriate radio button.

Which of the following is true for the Student Version above?

Word-for-Word plagiarism

Paraphrasing plagiarism

This is not plagiarism

Hints

Item 3

In the case below, the original source material is given along with a sample of student work. Determine the type of plagiarism by clicking the appropriate radio button.

Which of the following is true for the Student Version above?

Word-for-Word plagiarism

Paraphrasing plagiarism

This is not plagiarism

Hints

Item 4

In the case below, the original source material is given along with a sample of student work. Determine the type of plagiarism by clicking the appropriate radio button.

Which of the following is true for the Student Version above?

Word-for-Word plagiarism

Paraphrasing plagiarism

This is not plagiarism

Hints

6. Elasticity and total revenue

The following graph shows the daily demand curve for bikes in San Diego.

Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.

Note: You will not be graded on any changes made to this graph.

Describe the events of hemostasis, including both the intrinsic and extrinsic pathways for blood coagulation.

Compare and contrast the specific pattern of blood flow in the the fetal circulation with the circulation of the neonate. In what important ways are they different? Explain what changes occur shortly after birth and the mechanisms involved.

Is the creation of the National Response Plan, the National Incident Management System, and the Department of Homeland Security the step in the right direction, or is the government responding to political forces to appear that they are making progress in the protection of its citizens?

What policy changes or solution would you recommend to address these issues?