Barfly Inc. manufactures and markets a line of non-alcoholic mixers sold to restaurants and bars. Barfly’s Creative Bartender has recently experimented with making alcoholic versions with the intention of bottling and marketing these directly to the public through appropriate retail outlets. Prior spending on R&D was $1.5 million and Barfly anticipates spending half of that again during the first year of the project to conclude R&D (for total R&D of $2.25 million). The cost of building the manufacturing line is estimated at $1,175,000.

Marketing projects revenues from the new product line will be 800,000 units in the first year, growth in years 2 and 3 at 15%, growth in year 4 at 10%, and 5% for year 5. While Barfly anticipates the product will have a longer life than 5 years, their initial projections are for a 5 year time horizon, fully depreciating the cost of plant and equipment over that time on a straight-line basis.

Revenue per unit is projected to be $2.50 in the first year, with prices rising by 3% per year thereafter. COGS are projected to be 68% of revenues, SG&A 7% of revenues, and the company’s marginal tax rate is 32%. Net working capital required for the project is expected to be 2% of revenues annually once the project is fully online in year 1.

Barfly’s balance sheet includes $3,000,000 in total capital, of which $980,000 is debt. The market yield to maturity on debt is 3.75%, the risk free rate on a 5-year Treasury is 3%, and the market risk premium is 6.5%. The company’s beta is 1.3 and the CFO uses the CAPM to estimate cost of equity.

1. What is the project’s NPV?
2. What is the project’s IRR?
3. Should the project be accepted?

Management has been studying the company’s capital structure and is considering using a small secondary offering of stock to pay down debt. The following data is used to determine the cost of debt under varying capital structures.

4. If Barfly issues $180,000 in new equity and uses the proceeds to repurchase (and defease*) existing debt, what would the resulting weighted average cost of capital be?
5. Should management move towards this capital structure? Why or why not?

Barfly Inc. manufactures and markets a line of non-alcoholic mixers sold to restaurants and bars. Barfly’s Creative Bartender has recently experimented with making alcoholic versions with the intention of bottling and marketing these directly to the public through appropriate retail outlets. Prior spending on R&D was $1.5 million and Barfly anticipates spending half of that again during the first year of the project to conclude R&D (for total R&D of $2.25 million). The cost of building the manufacturing line is estimated at $1,175,000.

Marketing projects revenues from the new product line will be 800,000 units in the first year, growth in years 2 and 3 at 15%, growth in year 4 at 10%, and 5% for year 5. While Barfly anticipates the product will have a longer life than 5 years, their initial projections are for a 5 year time horizon, fully depreciating the cost of plant and equipment over that time on a straight-line basis.

Revenue per unit is projected to be $2.50 in the first year, with prices rising by 3% per year thereafter. COGS are projected to be 68% of revenues, SG&A 7% of revenues, and the company’s marginal tax rate is 32%. Net working capital required for the project is expected to be 2% of revenues annually once the project is fully online in year 1.

Barfly’s balance sheet includes $3,000,000 in total capital, of which $980,000 is debt. The market yield to maturity on debt is 3.75%, the risk free rate on a 5-year Treasury is 3%, and the market risk premium is 6.5%. The company’s beta is 1.3 and the CFO uses the CAPM to estimate cost of equity.

1. What is the project’s NPV?
2. What is the project’s IRR?
3. Should the project be accepted?

Management has been studying the company’s capital structure and is considering using a small secondary offering of stock to pay down debt. The following data is used to determine the cost of debt under varying capital structures.

4. If Barfly issues $180,000 in new equity and uses the proceeds to repurchase (and defease*) existing debt, what would the resulting weighted average cost of capital be?
5. Should management move towards this capital structure? Why or why not?

Consider each of the scenarios below. For each statement, decide which statistical procedure is most appropriate.

  ?    One-sample hypothesis test for a single proportion    One-sample confidence interval for a single proportion    Two-sample hypothesis test for the difference in proportions    Two-sample confidence interval for the difference in proportions    Chi-square test for multiple categories of a single variable    Chi-square test of independence of 2 categorical variables    One-sample hypothesis test for a single mean    One-sample confidence interval for a single mean    Two-sample hypothesis test for the difference in means    Two-sample confidence interval for the difference in means      1. An insurance company selected a random sample of 500 clients under 18 years of age and found that 180 of them had had an accident in the previous year. A random sample of 600 clients aged 18 and older was also selected and 150 of them had had an accident in the past year. We want to determine if the accident proportions differ between the two age groups.

  ?    One-sample hypothesis test for a single proportion    One-sample confidence interval for a single proportion    Two-sample hypothesis test for the difference in proportions    Two-sample confidence interval for the difference in proportions    Chi-square test for multiple categories of a single variable    Chi-square test of independence of 2 categorical variables    One-sample hypothesis test for a single mean    One-sample confidence interval for a single mean    Two-sample hypothesis test for the difference in means    Two-sample confidence interval for the difference in means      2. A nutritionist wants to know the proportion of Americans who say they limit their consumption of artificial sweeteners. A poll of 2537 US adults is conducted and the proportion is recorded.

  ?    One-sample hypothesis test for a single proportion    One-sample confidence interval for a single proportion    Two-sample hypothesis test for the difference in proportions    Two-sample confidence interval for the difference in proportions    Chi-square test for multiple categories of a single variable    Chi-square test of independence of 2 categorical variables    One-sample hypothesis test for a single mean    One-sample confidence interval for a single mean    Two-sample hypothesis test for the difference in means    Two-sample confidence interval for the difference in means      3. A claim is made that 87% of college undergraduates send more than 10 text messages per day. You collect a random sample of undergraduates to determine if the claim is reasonable or not.

  ?    One-sample hypothesis test for a single proportion    One-sample confidence interval for a single proportion    Two-sample hypothesis test for the difference in proportions    Two-sample confidence interval for the difference in proportions    Chi-square test for multiple categories of a single variable    Chi-square test of independence of 2 categorical variables    One-sample hypothesis test for a single mean    One-sample confidence interval for a single mean    Two-sample hypothesis test for the difference in means    Two-sample confidence interval for the difference in means      4. A researcher wants to estimate the average yearly cost of attendance at community colleges in the US. They collect a simple random sample of 50 community colleges and calculate the mean and sd of the yearly cost of attendance at each school.

  ?    One-sample hypothesis test for a single proportion    One-sample confidence interval for a single proportion    Two-sample hypothesis test for the difference in proportions    Two-sample confidence interval for the difference in proportions    Chi-square test for multiple categories of a single variable    Chi-square test of independence of 2 categorical variables    One-sample hypothesis test for a single mean    One-sample confidence interval for a single mean    Two-sample hypothesis test for the difference in means    Two-sample confidence interval for the difference in means      5. An insurance company selected a random sample of 500 clients under 18 years of age and found that 180 of them had had an accident in the previous year. A random sample of 600 clients aged 18 and older was also selected and 150 of them had had an accident in the past year. We want to determine how much the accident proportions differ between the two age groups.

Assuming IQ scores are normally distributed in the population with a mean of 100 and a standard deviation of 16, what percentages of IQ scores are less than 120, between 110 and 130, and what IQ will place you in the top 8% of the population?

Python

#Remember that Fibonacci's sequence is a sequence of numbers
#where every number is the sum of the previous two numbers.
#
#Joynernacci numbers are similar to Fibonacci numbers, but
#with two differences:
#
# - Fibonacci numbers are famous, Joynernacci numbers are
# not (yet).
# - In Joynernacci numbers, even-indexed numbers are the
# sum of the previous two numbers, while odd-indexed
# numbers are the absolute value of the difference
# between the previous two numbers.
#
#For example: the Joynernacci sequence starts with 1 and 1
#as the numbers at index 1 and 2. 3 is an odd index, so
#the third number would be 0 (1 - 1 = 0). 4 is an even
#index, so the fourth number would be 1 (0 + 1). 5 is an
#odd index, so the fifth number would be 1 (1 - 0). And
#so on.
#
#The first several Joynernacci numbers (and their indices)
#are thus:
#
# 1 1 0 1 1 2 1 3 2 5 3 8 5 13 8 21 13 34 21
# 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
#
#Write a function called joynernacci that returns the nth
#Joynernacci number. For example:
#
# joynernacci(5) -> 1
# joynernacci(12) -> 8
#
#We recommend implementing joynernacci recursively, but it
#is not required.

#Write your code here!

#Below are some lines of code that will test your function.
#You can change the value of the variable(s) to test your
#function with different inputs.
#
#If your function works correctly, this will originally
#print: 1, then 8
print(joynernacci(5))
print(joynernacci(12))

The Bank of England (BoE) on Monday presented the scenario for its second annual stress tests,which it said expanded on last year's excerise to include more of a focus on global risks.The BoE said it was modelling a milder stress scenario for the UK economy than last time.Its assumed peak-to-trough decline in the global economy was only a third of the fall that happened in the 2008 crisis.

The number of banks being tested is slightly lower as the Co-operative Bank,the only failure in last year's test,has been excluded because it is in the process of shrinking under a drastic restructuring plan.

However, the BoE is expected to announce an expansion of the exercise to include more institutions this summer.Officials are considering including the UK operations of foreign banks in the exercise as well as large insurers and asset managers.

For the first time the stress test includes an assessment of how banks' leverage ratios - measuring equity to total assets - emerge from a crisis as well as their capital ratios, which measure equity to risk-adjusted assets.

The five-year stress scenarios, including a slowdown in China's real economic growth from 7 Percent to 1,7 percent and a one-third fall in chinese and Hongkong house prices,is likely to put most strain onHSBC and Standard Chartered,which are UK-based but earn most of their profits in Asia.

The six banks and one building society - including Barclays,LLyods Banking Group,Royal Bank of Scotland,Santander UK and Nationwide-will be tested against two key minimum 'thresolds' in the stress scenario: a 4,5 per cent common equity tier one capital ratio and 3 per cent leverage ratio.

Banks have been told that they could be required to raise more capital even if they remain above the thresolds for capital and leverage but fall short on qualitative aspects of the test , such as the strength of reporting and controls.

In this year's test the UK economy declines by as much as 2,3 per cent while residential property prices drop by a fifth, there is a prolonged period of deflation and interest ratesfall to zero for almost two years.

a) What risk wuld you put into a banking stress test ?

b) Why are these risk scenarios extreme but possible ?

6.10. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months. a. Calculate , , and for a two step tree b. Value the option using a two step tree.

WD Imagine Inc. has three locations in Canada: Vancouver, Toronto and Montreal. The company develops and maintains web-designs for medium size companies. Management of Vancouver office is concerned about the cost of handling web-related matters.

WD Imagine Vancouver Office has provided the following data for the year 2019:

Junior web-designers salaries          $ 280,000

Senior web-designers salaries            $ 320,000

Office manager salary                        $ 120,000

WD accountant believes that apart from salaries all other expenses are fixed costs and cannot be meaningfully assigned to individual job.

The employees of WD-Vancouver Office have prepared the following table that shows how their time was distributed last year across the two activities

Jobs at Vancouver office during 2019 were as follows:

The costs relating to these activities for Toronto office are listed below:

Required:

a. Compute Vancouver office activity rates for developing complex wed-design AND Routine web-design jobs.

b. Compare the Vancouver results to that of Toronto Office. Suggest two possible reason for the discrepancies noted in each activity rate: complex wed-design AND Routine web-design jobs. (ie 4 in total).

Note that Vancouver is a big city so Burnaby is a small city within Vancouver.

Case Study Report

The last 40 years in Australia has seen a blurring of the three categories (between tax planning, tax avoidance and tax evasion), in particular, the distinction between [what constitutes] tax avoidance and tax evasion” (Xynas, 2011). Alongside economic globalization, the recent decades have witnessed the rise of transfer pricing that facilitates the free movement of capital and tax avoidance (Hampton & Sikka, 2005; Sikka, 2017). In conventional accounting literature, transfer pricing is portrayed as a technique for optimal allocation of costs and revenues… Such representations… simultaneously acknowledge and occlude how it is deeply implicated in processes of wealth retentiveness that enable companies to avoid taxes and facilitate the light of capital” (Sikka & Willmot, 2010, p.342).

REQUIRED: (1) Discuss the overlaps and distinctions among tax planning, tax avoidance, and tax evasion, with particular reference (but not limited) to Xynas (2011). (500 words excluding bibliography).

(2) Explain and evaluate the concept of transfer pricing and how it relates to the above quotes. You should address the issues including (but not limited to) the social, political, financial and ethical implications on business and broader society (1500 words excluding bibliography). Students are required to reference at least ten (10) academic journal articles.

Suggested readings: Hampton, M.P. & Sikka, P. (2005), ‘Tax avoidance and global development’, Accounting Forum, vol.41, no.4, pp.245-248.

Sikka, P. & Willmott, H. (2010), ‘The dark side of transfer pricing: Its role in tax avoidance and wealth retentiveness’, Critical Perspectives on Accounting, vol.21, no.4, pp.342-356.

Sikka, P. (2017), ‘Accounting and taxation: Conjoined twins or separate siblings?’, Accounting Forum, vol.41, pp.390-405.