Narto Co. (a U.S. firm) exports to Switzerland and expects to receive 200,000 Swiss francs in one year. The one-year U.S. interest rate is 5% when investing funds and 7% when borrowing funds. The one-year Swiss interest rate is 9% when investing funds, and 10% when borrowing funds. The spot rate of the Swiss franc is $.80. Narto expects that the spot rate of the Swiss franc will be $.75 in one year. There is a put option available on Swiss francs with an exercise price of $.79 and a premium of $.02.
a. Determine the amount of dollars that Narto Co. will receive at the end of one year if it implements a money market hedge.
b. Determine the amount of dollars that Narto Co. expects to receive at the end of one year (after accounting for the option premium) if it implements a put option hedge.
In: Finance
Bates Co. has purchased Canadian dollar put options for speculative purposes. Each option was purchased for a premium of $.015 per unit, with an exercise price of $.78 per unit. Bates Co. will purchase the Canadian dollars just before it exercises the options (if it is feasible to exercise the options). It plans to wait until the expiration date before deciding whether to exercise the options.
(1) What is the net profit or loss per unit to Bates Co. based on the following listed possible spot rates of the Canadian dollar on the expiration date.
Possible Spot Rate of Canadian Dollar on Expiration Date
$0.76
$0.77
$0.78
$0
$0.80
$0.81
(2) For each possible spot rate, will the option be exercised? Why or why not?
Please show how answers are derived.
In: Finance
An asset has a $200k fair value. It is ‘rented’ on 1/1/A to Lessee Co. for 3 years. At EOY C the asset is expected to have a fair value of $100k when it is returned to Lessor Co. Assume the asset has an expected useful life of 5 years, and that Lessor Co. uses an implicit interest rate of 10% for lease accounting. Lessor depreciates leased type B assets S-L, -0- S.V. Provide the following information.
a. Right of Use Asset, 1/1/A_________
b. Performance Obligation, 12/31/A_________
c. Lease Receivable, 12/31/B_________
d. Annual lease payment__$45646.80__
e. Lessee’s annual lease entries
f. Lessor’s annual lease entries
g. Lessor’s annual depreciation expense_________
In: Accounting
| Prepare the necessary journal entries for the following transactions of Almez Co. | |||||
| 1-Dec | Almez Co. received a $20,000, 4 month, 6 % note from Drew Company in settlement of and | ||||
| account receivable. | |||||
| 31-Dec | Accrue interest | ||||
| 1-Apr | Almez Co. receives full payment on the Drew note. | ||||
| Compute bad debt expense based on the following information and prepare the resulting | |||||
| journal entries. | |||||
| 31-Dec | Kerr Company estimates that 6% of accounts receivable will become uncollectible. | ||||
| Accounts receivable are $120,000 at the end of the year, and the allowance for doubtful | |||||
| accounts has a credit balance of $1,500. | |||||
| 31-Dec | Use the same information as above except assume that the allowance for doubtful accounts | ||||
| has a debit balance of $200. | |||||
I need help with these two problems
In: Accounting
In: Finance
Your co-worker and you agree that the Fama-French
five-factor model explains stock returns better than the market
model. Your co-worker ran two sets of 100 time-series regressions
of the excess returns of the stocks in the S&P100 index on: 1)
the five factors that make up the Fama-French five-factor model and
2) the market factor only. Your co-worker argues that if the
five-factor model is indeed better, she should find a smaller
number of statistically significant alphas in set 1) where she used
all five factors than in set 2) where she used only the market
factor as the regressor. Do you agree or disagree? Briefly
explain.
In: Finance
NPV
Holiday Co. wants to sell a new product. The company has been considering this idea for a while now and spent $300,000 in R&D. They have also ordered a marketing analysis from a consulting firm, for which they have paid 50% of the $80,000 contract. The balance will be paid next week.
The new product will require an investment in a new equipment of $750K and an increase in net working capital of $75K. The project will last 7 years. Half of the change in net working capital will be recovered in year 6 and the rest the in the last year.
The equipment will be sold for $150K when the project ends. The project will generate annual sales of $300K with $130K of operating expenses. Holiday Co. has a tax rate of 35%, a WACC of 9% and a CCA depreciation rate of 30%.
Calculate the NPV of this project for Holiday Co.
In: Finance
Journalize entries for the following related transactions of Manville Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles.
| Mar. | 1 | Purchased $90,000 of merchandise from Wright Co. on account, terms 2/10, n/30. |
| 9 | Paid the amount owed on the invoice within the discount period. | |
| 11 | Discovered that $18,000 of the merchandise purchased on March 1 was defective and returned items, receiving credit for $17,640 [$18,000 − ($18,000 × 2%)]. | |
| 18 | Purchased $10,000 of merchandise from Wright Co. on account, terms n/30. | |
| 20 | Received a refund from Wright Co. for return on Mar. 11 less the purchase on Mar. 18. |
X
Chart of Accounts
| CHART OF ACCOUNTS | ||||||
| Manville Heating & Air Company | ||||||
| General Ledger | ||||||
|
||||||
In: Accounting
On January 1 of the current year, Townsend Co. commenced
operations. It operated its plant at 100% of capacity during
January. The following data summarized the results for
January:
| Units | ||
| Production | 50,000 | |
| Sales ($18 per unit) | (42,000) | |
| Inventory, January 31 | 8,000 | |
| Manufacturing costs: | ||
| Variable | $575,000 | |
| Fixed | 80,000 | |
| Total | $655,000 | |
| Selling and administrative expenses: | ||
| Variable | $35,000 | |
| Fixed | 10,500 | |
| Total | $45,500 |
a. Prepare an income statement using absorption costing.
| Townsend Co. | ||
| Absorption Costing Income Statement | ||
| For the Month Ended January 31 | ||
| $ | ||
| Cost of goods sold: | ||
| $ | ||
| $ | ||
| Operating income | $ | |
b. Prepare an income statement using variable costing.
| Townsend Co. | ||
| Variable Costing Income Statement | ||
| For the Month Ended January 31 | ||
| $ | ||
| Variable cost of goods sold: | ||
| $ | ||
| $ | ||
| $ | ||
| Fixed costs: | ||
| $ | ||
| Operating income | $ | |
In: Accounting
K Company acquired 80 percent of the outstanding shares of Duo Company by paying $420,000 in cash. The fair value of Duo’s identifiable assets is $630,000, and the liabilities assumed by K Co. in this business combination are $205,000.
a. Please calculate the total amount of goodwill on the B/S this year. Also indicate the amount of goodwill that belongs to the noncontrolling interest account on B/S.
b. K Co. must conduct an impairment test of the goodwill related to the acquisition of Duo. The assets of Duo are the smallest group of assets that generate cash inflows, and it is a separate cash generating unit. K. Co estimated the following items:
Fair value less costs to sell is $ 370,000
Present value of future cash flows is $350,000
Please calculate the impairment loss that should be recorded on I/S.
In: Accounting