Identify the applicable accounting convention for the following business scenario and explain your choice

The Morrison Company receives much of its revenue from those customers who buy or rent furniture and appliances on the installment plan. Because the company uses an accrual-based accounting system, revenue is recognized at the point of sale, even though cash comes in on a monthly basis from customers. Lately, the company's accountant is questioning the use of the accrual basis for recognizing revenue, because several customers have defaulted on their contracts, causing problems in the accounting system.

Defense Electronics, Inc. (DEI), a large publicly traded firm is the market share leader in radar detection systems (RDSs), is considering a new project producing a new line of RDSs. The project will last 5 years and is expected to generate the following net cash flows (CFFA):

Year CFFA

1 $12,450,000

2 $12,450,000

3 $12,450,000

4 $12,450,000

5 $26,575,000

a) The initial cost of this project is $38,600,000. If the appropriate discount rate for this project is 12.31%, what is the NPV of this project?

b) What is the IRR on this project?

c) Do you recommend going ahead with this project? Why or why not? Clearly explain your answer.

The table shows the estimated percentage P of the population of a certain country that are mobile-phone subscribers. (End of year estimates are given.)

(a) Find the average rate of change of P.

(i) From 2003 to 2007 ........................... percentage points per year

(ii) From 2003 to 2005 ............................. percentage points per year

(iii) From 2001 to 2003 ............................... percentage points per year

(b) Estimate the instantaneous rate of growth in 2003 by taking the average of two average rates of change. (Use the average rates of change for 2001 to 2003 and 2003 to 2005.)
........................... percentage points per year

(c) Estimate the instantaneous rate of growth in 2003 by sketching a graph of P and measuring the slope of a tangent. (Sketch your graph so that it is a smooth curve through the points, and so that the tangent line has an x-intercept of 1999.3 and passing through the point

(2006, 46.6).

Round your answer to two decimal places.)
.................................... percentage points per year

The data in TECHPRO.sav, obtained from Business Week’s (June 22, 2006) technology section, represents typical salaries of technology professionals in 13 metropolitan areas for 2003 and 2005. Suppose you want to determine if the mean salary of technology professionals at all US. Metropolitan areas have increased between 2003 and 2005.

(a) Set up the null and alternative hypothesis for the test.   

(f) Conduct the appropriate test and provide your conclusion. More specifically, I want you to examine   whether the null hypothesis should be rejected by analyzing the data with SPSS. alpha=0.05

DATA SET:

The data in TECHPRO.sav, obtained from Business Week’s (June 22, 2006) technology section, represents typical salaries of technology professionals in 13 metropolitan areas for 2003 and 2005. Suppose you want to determine if the mean salary of technology professionals at all US. Metropolitan areas have increased between 2003 and 2005.

(a) Set up the null and alternative hypothesis for the test.   

(f) Conduct the appropriate test and provide your conclusion. More specifically, I want you to examine   whether the null hypothesis should be rejected by analyzing the data with SPSS. alpha=0.05

DATA SET:

1. The comparative income statement of Lawn Products, Inc. showed sales of $325,000 in 2004 and $494,450 in 2005. Compute the percentage of net change in sales. (Round answer to one decimal place.)a. 52.1%b. 34.3%c. 48.5%d. 65.7%

2. The balance sheet of Food Products, Inc. showed owners' equity of $200,000 in 2001 and $320,000 in 2002. Compute the percentage of increase in owners' equity. (Round answer to one decimal place.)a. 37.5%b. 62.5%c. 60.0%d. 38.4%

The table below includes reading test scores for 30 students in a 6^th grade class. Follow the steps outlined in the Corder & Foreman’s textbook (pp. 24-27) to examine the sample’s skewness and kurtosis for normality for an alpha (α) level of .05. Your response should be organized according to those steps. Report your findings. (10 points) (5 points each for skewness and kurtosis. For each 5 points= 2 points for SPSS Printout, 2 points for Z, and 1 point for interpretation)

Sixth-Grade Reading Test Scores

79         74         78         70         80         72         75         80         83         80       

74         73         70         74         81         75         81         82         76         71        

76         74         81         74         74         77         76         74         80         76       

Create new series with quarterly money growth rates, inflation rates, velocity growth rates, and real GDP

growth rates.

Note: The quarterly growth rate of a variable x is the growth rate between two

consecutive quarters.

Burlap Fashions (BFS), a successful fashion designer, hired you to price their upcoming IPO. The plan is for BFS to issue 200 million shares. Being an unlisted company, you decide to price BFS off three close and similar publicly traded competitors, Silk & Wool (SWL), Rag & Tarp (RGT), and CowTown (CTN) fashion.

You know that SWL, RGT, and CTN EV/EBIT multiples are 11.0x, 12.0x, and 13.0x, respectively. You estimated that BFS' forward EBIT for 2021 amounts to $500 million and that the firm has $1billion in debt and $1 billion in cash. At what stock price should you bring BFS to the market.  

A: 60

B 45

C 6

D 30

Which two of the following five statements are correct?

Select two alternatives:

When a private equity firm purchases the outstanding equity of a publicly traded firm using debt financing, thereby taking the company private, the transaction is called a leveraged buyout.

The process of selling stock to the public for the first time is called a seasoned equity offering (SEO).

Individual investors who buy equity in small private firms are called angel investors.

Researchers have found that, on average, the market greets the news of an SEO with a price increase.

The major advantage of undertaking an IPO is also one of the major disadvantages of an IPO: When investors diversify their holdings, the equity holders of the corporation become more concentrated.