Questions
Q2: You have just graduated from MBA program with finance major. Immediately after graduation you have...

Q2: You have just graduated from MBA program with finance major. Immediately after graduation you have been hired as a financial analyst in a highly prestigious listed company name Cornejo. Your first assignment is to estimate the cost of equity capital and stock price of the company. Your assistant gathered the following information for you:

  • The dividend per share (DPS) record of the company over the last 5 years is as follows:

                                       Year

Dividend per Share (DPS)

t-5

7.80

t-4

9.4

t-3

10.85

t-2

11.2

t-1

11.7

t0

10

  • Risk free rate is 3.5 percent
  • Market risk premium is 5 percent
  • Cornejo Co has an estimated beta of 1.10
  • The company’s dividend growth rate is expected to remain constant for the foreseeable future.

Required:

  1. Estimate the company’s cost of equity capital using CAPM.  
  2. Draw and briefly define the security market line (SML).
  3. Extrapolate a past growth rate. (
  4. Estimate the current price of the company’s shares.
  5. State clearly any limitations and assumptions that you made in your calculations.

In: Finance

Problem 39: You have just turned 30 years old, have just received your MBA, and have...

Problem 39:

You have just turned 30 years old, have just received your MBA, and have accepted your first job. Now you must decide how much money to put into your RRSP. Your RRSP works as follows: Every dollar in the plan earns 7% per year. You cannot make withdrawals until your 65th birthday. After that point, you can make withdrawals as you see fit. You decide that you will plan to live to 100 and work until you turn 65. You estimate that to live comfortably in retirement, you will need $100,000 per year starting at the end of the first year of retirement (i.e., when you turn 66) and ending on your 100th birthday. You will contribute the same amount to the plan at the end of every year that you work. How much do you need to contribute each year to fund your retirement?

**please list out step by step actions, please show the formulas used, please DONT USE excel**

Problem 40:

* Problem 39 is not very realistic because most people do not contribute a fixed amount to their RRSP each year. Instead, you would prefer to contribute a fixed percentage of your salary each year. Assume that your starting salary is $75,000 per year and it will grow 2% per year until you retire. Assuming everything else stays the same as in Problem 39, what percentage of your income do you need to contribute to the plan every year to fund the same retirement income?

**please list out step by step actions, please show the formulas used, please DONT USE excel**

In: Finance

2. Artie Siegel, an MBA student, has been having problems balancing his checkbook. His monthly income...

2. Artie Siegel, an MBA student, has been having problems balancing his checkbook. His monthly income is derived from a graduate research assistantship; however, he also makes extra money in most months by tutoring undergraduates in their quantitative analysis course. His historical chances of various income levels are shown in the following table:

Monthly Income* ($)

Probability

350

0.40

400

0.20

450

0.30

500

0.10

*Assume that this income is received at the beginning of each month.

Siegel’s expenditures also vary from month to month, and he estimates that they will follow this distribution:

Monthly Expenses ($)

Probability

300

0.10

400

0.45

500

0.30

600

0.15

He begins his final year with $600 in his checking account. Simulate the entire year (12 months) on the next page and discuss Siegel’s financial picture, i.e., will he be able to keep his head above water--(out of debt)? What is his expected average profit for the 12 months? Use the random numbers below.

Random numbers for Income and Expenses

Income

85

54

73

95

9

19

81

2

76

55

57

1

Expenses

99

44

1

80

95

72

75

16

32

57

31

32

In: Statistics and Probability

MBA 6400 Case Study #1 Short-term investment returns: money market instruments Part of your responsibilities as...

MBA 6400 Case Study #1

Short-term investment returns: money market instruments Part of your responsibilities as a junior financial analyst is researching and identifying potential short-term liquid investment options for your firm. These investment vehicles are at times used by the firm during periods when their cash inflows exceed projections. The firm, at times, uses excess cash to purchase short-term debt instruments providing a low, but safe marginal return on invested capital.

Your Director, who reports to the firm's Chief Financial Officer (CFO) has come to you seeking your recommendation on short-term investment options for the upcoming year. The Director has asked for recommendations and a report illustrating your optimal analysis for investing $2.5m of excess cash.  

Current background info: We have a potential impending compound money market problem: The U.S. is issuing more debt, in part due to the recent tax cuts. Simultaneously, the Fed, China, Japan and to a lesser degree Russia have been reducing their holdings of U.S. Debt. Therefore, if the U.S. Treasury Department can't get entities to their positions holding U.S. debt, then the pressure to increase interest rates to make newly issued securities attractive increases. Increased interest rates at the Treasury means securities prices fall with cascading impacts.

Therefore, the current interest rate environment is one where rates are expected to increase.

The analysis report to be presented to the Director is to include:

1. Your concise statement and recommendation of the specific short-term investment options that meets the firm's criteria.

2. A detailed summary of the investment asset and the parameters you will use in which to base your recommendation.

3. A detailed description of the upside and downside risk of each investment. The latter is of particular importance as the firm may decide to manage excess cash in one or more vehicles for longer than one year.

4. Source identifier for all investment selections

a. Example: website URL

5. A spreadsheet (embedded into the report) illustrating the following:

a. Asset category/classification

b. Specific money market instrument identifier i. Example: U.S. Treasury CUSIP

6. EAR for each investment

7. YTM for each investment

a. If held to maturity

b. If sold at the end of 12 months

8. Total return for investment portfolio if held to maturity

9. Spreadsheet model is to include all cell-based formulas for all calculations Your conclusion is to summarize the recommendation made in item #1 above Format for report.

In: Finance

Governments must now account for their capital assets, including infrastructure, and they must recognize in their...


Governments must now account for their capital assets, including infrastructure, and they must recognize in their accounts that the assets may not last forever (unless continually preserved). In the year a road maintenance district was established, it engaged in the transactions that follow
involving capital assets (all dollar amounts in thousands). The district maintains only a single governmental fund (a general fund).

1. Received authority over roads previously “owned” by the county. The estimated replacement cost of the roads was $60,000. On average they have a remaining useful life of 40 years.
2. Acquired machinery and equipment for $700, with general fund resources. They have a useful life of 10 years.
3. Incurred costs of $3,000 to construct a building. The construction was financed with general obligation bonds. The building has a useful life of 30 years.
4. Acquired equipment having a fair value of $60 in exchange for $20 cash (from general-fund resources) plus used equipment for which the district had paid $50. The used equipment had a fair value at the time of the trade of $40; depreciation of $25 had previously been recognized.
5. Sold land for $70 that had been acquired for $90.
6. Received a donation of land from one of the towns within the district. The land had cost the town $120, but at the time of the contribution had a fair market value of $500.
7. Incurred $1,200 in road resurfacing costs. The district estimates that its roads must be resurfaced every four years if they are to be preserved in the condition they were in when they were acquired.
8. Recognized depreciation of $100 on its building, $70 on its machinery and equipment, and $1,500 on its roads, in addition to any depreciation relating to the resurfacing costs.

a. Prepare entries to record the transactions so that they could be reflected in the district’s government-wide statements. The district has opted to depreciate its infrastructure assets.
b. Suppose instead that the district has elected not to depreciate its roads but to record as an expense only the costs necessary to preserve the roads in the condition they were in when acquired. How would your entries differ?
c. If, in fact, the roads have a useful life of 40 years, do you think it is sound accounting not to depre-ciate the roads? Explain.
d. If, in fact, the preservation costs are sufficient to preserve the roads in the condition they were in when the district acquired them, do you think it is sound accounting to depreciate the roads? Explain.

In: Accounting

outline essay “Why the Pledge of Allegiance Should Be Revised” By Gwen Wilde ​All Americans are...

outline essay

“Why the Pledge of Allegiance Should Be Revised”
By Gwen Wilde
​All Americans are familiar with the Pledge of Allegiance, even if they cannot always recite it perfectly, but probably relatively few know that the original Pledge did not include the words “under God.” The original Pledge of Allegiance, published in the September 8, 1892, issue of the Youth’s Companion, ran thus:
I pledge allegiance to my flag, and to the Republic for which it stands: one Nation indivisible, with Liberty and Justice for all. (Djupe 329)
In 1923, at the first National Flag Conference in Washington, DC, it was argued that immigrants might be confused by the words “my Flag,” and it was proposed that the words be changed to “the Flag of the United States.” The following year it was changed again, to “the Flag of the United States of America,” and this wording became the official—or, rather, unofficial—wording, unofficial because no wording had ever been nationally adopted (Djupe 329).
​In 1942, the United States Congress included the Pledge in the United States Flag Code, thus for the first time officially sanctioning the Pledge. In 1954, President Dwight D. Eisenhower approved adding the words “under God.” Thus, since 1954 the Pledge reads:
I pledge allegiance to the flag of the United States of America, and to the Republic for which it stands: one nation, under God, indivisible, with Liberty and Justice for all. (Djupe 329)
In my view, the addition of the words “under God is inappropriate, and they are needlessly divisive—an odd addition indeed to a Nation that is said to be “indivisible.”
​Very simply put, the Pledge in its latest form requires all Americans to say something that some Americans do not believe. I say “requires” because, although the courts have ruled that students may not be compelled to recite the Pledge, in effect peer pressure does compel all but the bravest to join in the recitation. When President Eisenhower authorized the change, he said,
In this way we are reaffirming the transcendence of religious faith in America’s heritage and future; in this way we shall constantly strengthen those spiritual weapons which forever will be our country’s most powerful resource in peace and war. (Sterner)
​Exactly what did Eisenhower mean when he spoke of “the transcendence of faith in America’s heritage,” and when he spoke of “spiritual weapons”? I am not sure what “the transcendence of faith in America’s heritage” means. Of course many Americans have been and are deeply religious—no one doubts it—but the phrase certainly goes far beyond saying that many Americans have been devout. In any case, many Americans have not been devout, and many Americans have not believed in “spiritual weapons,” but they have nevertheless been patriotic Americans. Some of them have fought and died to keep America free.
​In short, the words “under God” cannot be uttered in good faith by many Americans. True, something like 70 or even 80% of Americans say they are affiliated with some form of Christianity, and approximately another 3% say they are Jewish. I don’t have the figures for persons of other faiths, but in any case we can surely all agree that although a majority of Americans say they have a religious affiliation, nevertheless several million Americans do not believe in God.
​If one remains silent while others are reciting the Pledge, or even if one remains silent only while others are speaking the words “under God,” one is open to the charge that one is unpatriotic, is “unwilling to recite the Pledge of Allegiance.” In the Pledge, patriotism is connected with religious belief, and it is this connection that makes it divisive and (to be blunt) un-American. Admittedly the belief is not very specific: one is not required to say that one believes in the divinity of Jesus, or in the power of Jehovah, but the fact remains, one is required to express belief in a divine power, and, if one doesn’t express this belief, one is—according to the Pledge—somehow not fully an American, maybe even un-American.
​Please notice that I am not arguing that the Pledge is unconstitutional. I understand that the First Amendment to the Constitution says that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” I am not arguing that the words “under God” in the Pledge add up to the “establishment of religion,” but they certainly do assert a religious doctrine. Like the words “In God we trust,” found on all American money, the words “under God” express an idea that many Americans do not hold, and there is no reason why these Americans—loyal people who may be called upon to defend the country with their lives—should be required to say that America is a nation “under God.”
​It has been argued, even by members of the Supreme Court, that the words “under God” are not to be taken terribly seriously, not to be taken to say what they seem to say. For instance, Chief Justice Rehnquist wrote,
To give the parent of such a child a sort of “heckler’s veto” over a patriotic ceremony willingly participated in by other students, simply because the Pledge of Allegiance contains the descriptive phrase “under God,” is an unwarranted extension of the establishment clause, an extension which would have the unfortunate effect of prohibiting a commendable patriotic observance. (qtd. in Mears)
Chief Justice Rehnquist here calls “under God” a descriptive phrase,” but descriptive of what? If a phrase is a “descriptive phrase,” it describes something, real or imagined. For many Americans, this phrase does not describe a reality. These Americans may perhaps be mistaken—if so, they may learn of their error at Judgment Day—but the fact is, millions of intelligent Americans do not believe in God.
​Notice, too, that Chief Justice Rehnquist goes on to say that reciting the Pledge is “a commendable patriotic observance.” Exactly. That is my point. It is a patriotic observance, and it should not be connected with religion. When we announce that we respect the flag—that we are loyal Americans—we should not also have to announce that we hold a particular religious belief, in this case a belief in monotheism, a belief that there is a God and that God rules.
​One other argument defending the words “under God” is often heard: the words “In God We Trust” appear on our money. It is claimed that these words on American money are analagous to the words “under God” in the Pledge. But the situation really is very different. When we hand over some coins, or some paper money, we are concentrating on the business transaction, and we are not making any affirmation about God or our country. But when we recite the Pledge—even if we remain silent at the point when we are supposed to say “under God”—we are very conscious that we are supposed to make this affirmation, an affirmation that many Americans cannot in good faith make, even though they certainly can unthinkingly hand over (or accept) money with the words “In God We Trust.”
​Because I believe that reciting the Pledge is to be taken seriously, with a full awareness of the words that is quite different from when we hand over some money, I cannot understand the recent comment of Supreme Court Justice Souter, who in a case said that the phrase “under God” is “so tepid, so diluted, so far from compulsory prayer, that it should, in effect, be beneath the constitutional radar” (qtd. in “Guide”). I don’t follow his reasoning that the phrase should be “beneath the constitutional radar,” but in any case I am willing to put aside the issue of constitutionality. I am willing to grant that this phrase does not in any significant sense signify the “establishment of religion” (prohibitied by the First Amendment) in the United States. I insist, nevertheless, that the phrase is neither “tepid” nor “diluted. It means what it says—it must and should mean what it says, to everyone who utters it—and, since millions of loyal Americans cannot say it, it should not be included in a statement in which Americans affirm their loyalty to our great country.
​In short, the Pledge, which ought to unite all of us, is divisive; it includes a phrase that many patriotic Americans cannot bring themselves to utter. Yes, they can remain silent when others recite those two words, but, again, why should they have to remain silent? The Pledge of Allegiance should be something that everyone can say, say out loud, and say with pride. We hear much talk of returning to the ideas of the Founding Fathers. The Founding Fathers did not create the Pledge of Allegiance, but we do know that they never mentioned God in the Constitution. Indeed the only reference to religion, in the so-called establishment clause of the First Amendment, says, again, that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” Those who wish to exercise religion are indeed free to do so, but the place to do so is not in a pledge that is required of all school children and of all new citizens.

In: Economics

ChalaCorporation,whichbeganbusinessin2019appropriately,usestheinstallment salesmethodofaccountingforitsinstallmentsales.Thefollowingdatawereobtained forsalesduring2019and2020: 2019 2020 Kshs Kshs Installmentsales 360,000 350,000 Costofinstallmentsales 2

ChalaCorporation,whichbeganbusinessin2019appropriately,usestheinstallment
salesmethodofaccountingforitsinstallmentsales.Thefollowingdatawereobtained
forsalesduring2019and2020: 2019 2020
Kshs Kshs
Installmentsales 360,000 350,000
Costofinstallmentsales 234,000 245,000
Cashcollectionsoninstallmentsalesduring:
2019 150,000 100,000
2020 - 120,000Required:
Preparesummaryjournalentriesfor2019and2020toaccountfortheinstallmentsalesand
cash
collections.Thecompanyusesperpetualinventorysystem.

In: Accounting

XYZ purchased $100,000 equity interest in Z-Tech, Inc, on January 1, 2020. On November 30. 2020,...

XYZ purchased $100,000 equity interest in Z-Tech, Inc, on January 1, 2020. On November 30. 2020, Z-Tech paid dividends of $3,000 to XYZ. At December 31, 2020, XYZ's holdings in Z-Tech is valued at $101,000. Prepare the entries necessary to record (1) the purchase of the investment, (2) the receipt of dividends and (3) year-end adjusting entry assuming that XYZ uses the Available for Sale method to account for this investment.

In: Accounting

The following information for 2020 relates to Will, a single taxpayer, age 18: wages - 9,500;...

The following information for 2020 relates to Will, a single taxpayer, age 18: wages - 9,500; taxable interest income - 10,600; itemized deductions - 1,500. Compute Will's tax liability for 2020 assuming he is self-supporting. Compute Will's tax liability for 2020 assuming he is dependent of his parents and they support him entirely (his earned income is NOT more than 50% of his support). His parents marginal tax rate is 22% ​

In: Accounting

M sold investment real estate to B in 2020 for $100,000. M purchased the property 5...

  1. M sold investment real estate to B in 2020 for $100,000. M purchased the property 5 years ago for $60,000. The terms of the sale indicated that B was to pay $20,000 to M in 2020, $50,000 in 2021, and the remaining balance of $30,000 in 2022. M elected to use the installment method to report the gain. Assuming the payments are made as agree upon, how much gain should M report for each year?

  1. 2022

  2. 2021

  3. 2020

In: Economics