LIS Corporation, an environmental service provider, had revenues of $209 million in 2002 and reported losses of $3.1 million. It had earnings before interest and taxes of $12.5 million in 2002, and had debt outstanding of $109 million (in market value terms). There are 15.9 million shares outstanding, trading at $11 per share. The pre-tax interest rate on debt owed by the firm is 8.5%, and the stock has a beta of 1.15. The firm's EBIT is expected to increase 10% a year from 2003 to 2006, after which the growth rate is expected to drop to 4% in the long term. Capital expenditures will be offset by depreciation, and working capital needs are negligible. (The corporate tax rate is 40%, and the treasury bond rate is 7%.)

1. Estimate the cost of capital for LIS.

2. Estimate the value of the firm.

3. Estimate the value of equity (both total and on a per share basis).

3. In 2000, a sample of 209 people aged 18-30 found that they spent an average of 6.75 hrs/week on the internet. In 2006, a sample of 541 people aged 18-30 spent an average of 7.34 hrs/week on the internet. Has the average increased?

Use correct notation where appropriate.
For each of the following situations,
a) What is/are the population(s) in the study?
b) Does the scenario involve 1 or 2 parameters to be estimated/tested/compared?
c) What is/are the parameter(s) to be estimated/tested/compared? Be specific and use the appropriate notation.
d) What is/are the variable(s) involved. Is each numerical or categorical?
e) Is it most appropriate to create a confidence interval or conduct a hypothesis test? If a hypothesis test should be conducted, state the
hypotheses.
f) Will the critical value or test statistic be a z-value or t-value?

A city's 2006 research report titled Socio-economic Profiling of Urban Renewal Nodes and the accompanying Survey Questionnaire, which were used during class, are referred to below as the City’s KMP research report, survey questionnaire and data.

Q.1 The questions that follow below are taken directly from the City’s KMP Survey Questionnaire. Indicate the type of data (either nominal, ordinal, interval or ratio-scaled) likely to be obtained for each question. Substantiate your answer.

a.)    How many rooms, including kitchens are in the dwelling? (Count all rooms, but exclude bathrooms)? Number of rooms: .......

b.)    Where do you go to buy essential food stuff (i.e. bread, milk, etc)?

1. A shop inside a mall

2. A general dealer (i.e. Pick ‘n Pay, Shoprite, Checkers)

3. Café

4. House shop

5. Other, specify ……………………………….

Lactation promotes a temporary loss of bone mass to provide adequate amounts of calcium for milk production. The paper “Bone Mass Is Recovered from Lactation to Postweaning in Adolescent Mothers with Low Calcium Intakes” gave the following data on total body bone mineral content (TBBMC) (g) for a sample both during lactation (L) and in the postweaning period (P):

                Subject                 L                              P

                1                              1928                       2126      

                2                              2549                       2885

                3                              2825                       2895

                4                              1924                       1942

                5                              1628                       1750

                6                              2175                       2184

                7                              2114                       2164

                8                              2621                       2626

                9                              1843                       2006

                10                           2541                       2627

Estimate the difference between true average TBBMC for the two periods of concrete in a way that conveys information about precision and reliability. Does it appear plausible that the true average TBBMCs for the two periods are identical?

Your neighbor approached you about a dilemma he has with his mortgage. He purchased his house in 2006 with a $600,000, 6% fixed rate, 30 year mortgage. Then the great recession hit. Today his house is estimated to be worth less than the balance he owes on the mortgage. Furthermore, he was forced to take a new job at 20% less than what he was earning when he purchased the house. Here in 2012, 72 months later, he is contemplating entering into a mortgage modification program sponsored by the government. It offers 3 options.

1. reducing the interest rate to 4.5%
2. forgiveness of $100,000 of the principle due and continuing at 6%
3. refinancing the balance due with a new 15 year, 4% mortgage

Which option would minimize his monthly mortgage payment? Assume all refinancing costs will be paid by the government.

XM, Ltd. was a small engineering firm that built high-tech robotic devices for electronics manufacturers. One very complex device was partially completed at the end of 2018. Barb McLauren, head engineer, knew the experimental technology was a failure and XM would not be able to complete the $20,000,000 contract next year. However, the corporation was getting ready to be sold in January. She told the controller that the device was 80% complete at year-end and on track for successful completion the following spring; the controller accrued 80% of the contract revenue at December 31, 2018. McLauren sold the company in January 2019 and retired. By mid-year, it became apparent that XM would not be able to complete the project successfully and the new owner would never recoup his investment. Requirements

1. For complex, high-tech contracts, how does a company determine the percentage of completion and the amount of revenue to accrue?

2. What action do you think was taken by XM in 2019 with regard to the revenue that had been accrued the previous year?

Baird Company, which expects to start operations on January 1, 2018, will sell digital cameras in shopping malls. Baird has budgeted sales as indicated in the following table. The company expects a 14 percent increase in sales per month for February and March. The ratio of cash sales to sales on account will remain stable from January through March.

Required

1. Complete the sales budget by filling in the missing amounts.

2. Determine the amount of sales revenue Baird will report on its first quarter pro forma income statement.

Complete the sales budget by filling in the missing amounts. (Round intermediate calculations and final answers to 2 decimal places.)

Determine the amount of sales revenue Baird will report on its first quarter pro forma income statement. (Round intermediate calculations and final answer to 2 decimal places.)

Exercise 4-22

The adjusted trial balance for Pharoah Company is given below:

Create a Income Statement, Retained Earnings Statement, Balance Sheet

Solomon Company, which expects to start operations on January 1, 2018, will sell digital cameras in shopping malls. Solomon has budgeted sales as indicated in the following table. The company expects a 15 percent increase in sales per month for February and March. The ratio of cash sales to sales on account will remain stable from January through March.

1. Complete the sales budget by filling in the missing amounts.

2. Determine the amount of sales revenue Solomon will report on its first quarter pro forma income statement.

• Required A
• Required B

Complete the sales budget by filling in the missing amounts. (Round intermediate calculations and final answers to 2 decimal places.)

Determine the amount of sales revenue Solomon will report on its first quarter pro forma income statement. (Round intermediate calculations and final answer to 2 decimal places.)

The adjusted trial balance for Pharoah Company is given below.

Prepare the retained earnings statement for the year, prepare the income statement for the year, prepare the balance sheet at August 31.