In another study conducted in the same year (2015), the average monthly salary of residents in Bordeaux was found to be about €2353. And the standard deviation of the monthly salaries was €420.

In 2017, a study on the salary distribution of Paris residents was conducted. Assume that the salaries were normally distributed. A random sample of 10 salaries was selected and the data are listed below:

3200 3500 3000 2100 2950 2050 2440 3100 3500 2500

Question 8:

Assume that the standard deviation of the salaries was still the same as in 2015. Estimate the average salary (in 2017) with 95% confidence.

Question 9:

The assumption made in Question 8 was certainly unrealistic. Estimate the average salary (in 2017) with 95% confidence again assuming that the standard deviation had changed from 2015.

Question 10:

Estimate the variance of monthly salaries of Paris residents (in 2017) based on the sample provided above at a 95% confidence level.

Question 11:

How would you interpret the result in Question 10 above?

The following information pertains to the City of Williamson for 2017, its first year of legal existence. For convenience, assume that all transactions are for the general fund, which has three separate functions: general government, public safety, and health and sanitation.

Compensated absences (such as vacations and sick days) legally owed to general government workers at year-end total $13,000. These amounts will not be taken by the employees until so late in 2018 that the payment is not viewed as requiring 2017 current financial resources.

The city received a piece of art this year as a donation. It is valued at $14,000. It will be used for general government purposes. There are no eligibility requirements. The city chose not to capitalize this property.

The general government uses the storage shed that was acquired this year. It is being depreciated over 10 years using the straight-line method with no salvage value. The city uses the equipment for health and sanitation and depreciates it using the straight-line method over five years with no salvage value.

The investments are valued at $103,000 at the end of the year.

For the equipment that has been ordered but not yet received, the City Council (the highest decision-making body in the government) has voted to honor the commitment when the equipment is received.

1. a-1. Prepare a statement of activities for governmental activities for December 31, 2017.

2. a-2. Prepare a statement of net position for governmental activities for December 31, 2017.

3. b-1. Prepare a statement of revenues, expenditures, and other changes in fund balances for the general fund as of December 31, 2017. Assume that the city applies the consumption method.

4. b-2. Prepare a balance sheet for the general fund as of December 31, 2017. Assume that the city applies the consumption method.

In January of the current year, Don and Steve each invested $100,000 cash to form a corporation to conduct business as a retail golf equipment store. On January 5, they paid Bill, an attorney, to draft the corporate charter, file the necessary forms with the state, and write the bylaws. They leased a store building and began to acquire inventory, furniture, display equipment and office equipment in February. They hired a sales staff and clerical personnel in March and conducted training sessions during the month. They had a successful opening on April 1, and sales increased steadily throughout the summer. The weather turned cold in October, and all local golf courses closed by October 15, which resulted in a drastic decline in sales. Don and Steve expect business to be very good during the Christmas season and then to taper off significantly from January 1 through the end of February. The corporation accrued bonuses to Don and Steve on December 31, payable on April 15 of the following year. The corporation made timely estimated tax payments throughout the year. The corporation hired a bookkeeper in February, but he does not know much about taxation. Don and Steve have retrained you as a tax consultant and have asked you to identify the tax issues they should consider.

ZeroLeverage Co is a manufacturing firm. The company generates an EBIT of $250,000 per year and forever. ZeroLeverage Co will always distribute its earnings as dividends to its shareholders. ZeroLeverage Co’s current capital structure includes 100% equity. There are 100,000 shares of common stocks outstanding. ZeroLeverage Co’ project has a market beta 1.5. The risk-free asset is yielding 5% per year, and the market risk premium is 5% per year.

Recently, the CEO of ZeroLeverage Co, Mr. Peter Kyle, attended a Corporate Finance class. He learned that different capital structure may have some impacts on firm value. ZeroLeverage Co currently faces 35% corporate tax rate. Although ZeroLeverage Co doesn’t have any debt, many investment banks and financial advisors have approached Mr. Peter Kyle about the possibility of issuing bonds or borrowing from banks. Due to its good reputation, ZeroLeverage Co can get very favorable interest rates of 7%. Mr. Peter Kyle wants to know if it is a good idea to issue some debt and use the proceeds to buy back shares. To be specific, Mr. Peter Kyle is thinking about a potential start at issuing $1 million perpetual debt paying 7% interest per year and uses the money to buy back some shares of common stocks. Please help him evaluate the following questions.

(a) What is the expected rate of return for ZeroLeverage Co’s stock? (b) (3 points) What is the market value of ZeroLeverage Co if it keeps 100% equity? And what is ZeroLeverage Co’s stock price as an all-equity firm?

(c) What will be the market value of ZeroLeverage Co if it issues $1 million of perpetual debt paying 7% interest per year and uses the money to buy back some shares of common stocks?

(d) If ZeroLeverage Co issues $1 million of perpetual debt and uses the money to buy back some shares of common stocks, how many shares of common stocks will ZeroLeverage Co be able to buy back and what is the new stock price?

(e) What is the cost of equity and WACC of ZeroLeverage Co after it issue the debt?

(f). What are the possible relationships between capital structure and firm value under MM theorem without corporate tax and bankruptcy cost, under the MM theorem with only corporate tax, under the MM theorem with both corporate tax and bankruptcy cost?

The existing spot rate of the Singapore dollar is $.62. The one‑year forward rate of the Singapore dollar is $.61. The probability distribution of the future spot rate in one year is forecasted as follows:

                  Future Spot Rate                                     Probability

                          $.60                                                         25%

                            .63                                                         45

                            .65                                                         30

Assume that one‑year put options on Singapore dollars are available, with an exercise price of $.64 and a premium of $.04 per unit. One‑year call options on Singapore dollars are available with an exercise price of $.61 and a premium of $.02 per unit. Assume the following money market rates:

                                                      U.S.                 Singapore

            Deposit rate                        6%                         5%

            Borrowing rate                   8                            7

1. Assume that ABC Co. will need to pay 500,000 Singapore dollars in one year. Given the above relevant information, determine whether a forward hedge, money market hedge, or a currency options hedge would be most appropriate. Then compare the most appropriate hedge to an unhedged strategy and decide whether ABC Co. should hedge its receivables position. Please provide detailed explanation to your answers.
2. Assume that XYZ Inc. expects to receive 1 million Singapore dollars in one year. Given the above relevant information, determine whether a forward hedge, a money market hedge, or a currency options hedge would be most appropriate. Then, compare the most appropriate hedge to an unhedged strategy, and decide whether XYZ Inc. should hedge its payables position. Please provide detailed explanation to your answers.

Due to a recession, expected inflation this year is only 2%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 2%. Assume that the expectations theory holds and the real risk-free rate (r*) is 3.5%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 3.5%, what inflation rate is expected after Year 1? Round your answer to two decimal places.

Note: This problem is for the 2018 tax year.

Roberta Santos, age 41, is single and lives at 120 Sanborne Avenue, Springfield, IL 60781. Her Social Security number is 123-45-6780. Roberta has been divorced from her former husband, Wayne, for three years. She has a son, Jason, who is 17, and a daughter, June, who is 18. Jason's Social Security number is 111-11-1112, and June's is 123-45-6788. Roberta does not want to contribute $3 to the Presidential Election Campaign Fund.

Roberta, an advertising executive, earned a salary from ABC Advertising of $80,000 in 2018. Her employer withheld $9,000 in Federal income tax and $3,100 in state income tax.

Roberta has legal custody of Jason and June. The divorce decree provides that Roberta is to receive the dependency deductions for the children. Jason lives with his father during summer vacation. Wayne indicates that his expenses for Jason are $5,500. Roberta can document that she spent $6,500 for Jason's support during 2018. In prior years, Roberta gave a signed Form 8332 to Wayne regarding Jason. For 2018, she has decided not to do so. Roberta provides all of June's support.

Roberta's mother died on January 7, 2018. Roberta inherited assets worth $625,000 from her mother. As the sole beneficiary of her mother's life insurance policy, Roberta received insurance proceeds of $300,000. Her mother's cost basis for the life insurance policy was $120,000. Roberta's favorite aunt gave her $13,000 for her birthday in October.

On November 8, 2018, Roberta sells for $22,000 Amber stock that she had purchased for $24,000 from her first cousin, Walt, on December 5, 2012. Walt's cost basis for the stock was $26,000, and the stock was worth $23,000 on December 5, 2014. On December 1, 2018, Roberta sold Falcon stock for $13,500. She had acquired the stock on July 2, 2014, for $8,000.

An examination of Roberta's records reveals that she received the following:

• Interest income of $2,500 from First Savings Bank.
• Groceries valued at $750 from Kroger Groceries for being the 100,000th customer.
• Qualified dividend income of $1,800 from Amber.
• Interest income of $3,750 on City of Springfield school bonds.
• Alimony of $16,000 from Wayne; divorce finalized in 2015.
• Distribution of $4,800 from ST Partnership. Her distributive share of the partnership passive taxable income was $5,300. She had no prior passive activity losses. Assume that the qualified business income deduction applies and the W–2 wage limitation does not.

From her checkbook records, she determines that she made the following payments during 2018:

• Charitable contributions of $4,500 to First Presbyterian Church and $1,500 to the American Red Cross (proper receipts obtained).
• Paid $5,000 to ECM Hospital for the medical expenses of a friend from work.
• Mortgage interest on her residence of $7,800 to Peoples Bank.
• Property taxes of $3,200 on her residence and $1,100 (ad valorem) on her car. $800 for landscaping expenses for residence.
• Estimated Federal income taxes of $2,800 and estimated state income taxes of $1,000.
• Medical expenses of $5,000 for her and $800 for Jason. In December, her medical insurance policy reimbursed $1,500 of her medical expenses. She had full-year health care coverage.
• A $1,000 ticket for parking in a handicapped space.
• Attorney's fees of $500 associated with unsuccessfully contesting the parking ticket.
• Contribution of $250 to the campaign of a candidate for governor.

Because she did not maintain records of the sales tax she paid, she calculates the amount from the sales tax table to be $994.

Required:

Calculate Roberta's net tax payable or refund due for 2018.

• Enter all amounts as positive numbers. However, use the minus sign to indicate a loss.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Make realistic assumptions about any missing data.
• It may be necessary to complete the tax schedules before completing Form 1040.
• When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
• Use the Tax Rate Schedule provided. Do not use the Tax Tables.

PLEASE FILL OUT A 2018 1040 INCOME TAX RETURN

The market value of the apple tree in year t is V(t) = 200t − 5t²

b) At what year is the apple tree most valuable? What is the value of the tree?

c) Assume that this tree can be harvested only one time. If the real interest is 3%, when should the tree be harvested? (Round years to the closest integer.)

d) If the real interest is 5%, when should the tree be harvested? Compare your results from c) and d) and comment on your findings. Is this the result as you expected?

e) What will be the value of the apple tree at the time of harvest? What is the value of your asset if you invest the proceedings from harvest into bank account that pays 3% annual rate for the rest of period you calculated in part b)?