The Allied Group intends to expand the company's operation by making significant investments in several opportunities available to the group. Accordingly, the group has identified a need for additional financing in preferred and new common stock and new bond issues. The (Krf) risk-free rate for the company is 7%, and the appropriate tax rate is 40%. Also, the beta coefficient for the company is 1.3 and the market risk premium (Km) is 12%. New Debt (Kd) The company has been advised that new bonds can be sold on the market at par ($1000) with an annual coupon of 8%, for 30 years. New Common Stock Market analysis has determined that given the positive history of the firm, new common stock can be sold at $29 per share, with the last dividend being paid of $2.25 per share. The growth rate on any new delete the words highlighted in yellow common stock has been estimated at a constant rate of 15% per year for the next 3 years. Preferred Stock New Preferred Stock can be issued with an annual dividend of 10% of par and is paid annually and currently would sell for $90 per share. Tasks: Using the Capital Asset Pricing Model (CAPM), discuss and calculate the cost of new common stock (Ks). What would the dividend yield as a percentage (i.e., per dividend payment divided by the book value of a share of stock) today and a year from now if the dividend growth rate is 12%? What is the after-tax cost as a percentage (e.g., interest rate) of new debt today? What are your recommendations for raising capital based on your answers to the above questions plus considering other factors (e.g., current and potential changes in the economy locally, regionally, nationally and worldwide, changes in the demand and/or supply plus cost of materials, skilled labor, management and/or leadership, changes in interest, tax, inflation and/or supply of investment capital)?

CPR

Now that you have taken the time to evaluate your lifestyle by completing the Healthy Lifestyles Awareness Inventory, you may be able to identify behaviors that could lead to injury or illness, now or in the future. Identifying these behaviors is the first step to leading a healthier life. By using this contract as a tool, it will help you focus on working towards a specific goal to make your lifestyle healthier.

Behavior Modification Contract

Now that you have taken the time to evaluate your lifestyle by completing the Healthy Lifestyles Awareness Inventory, you may be able to identify behaviors that could lead to injury or illness, now or in the future. Identifying these behaviors is the first step to leading a healthier life. By using this contract as a tool, it will help you focus on working toward one specific goal to make your lifestyle healthier.

Goal:

Complete the sentence below. Be as specific as you can.

In the _____ weeks of this course, my goal is to—.......

Objectives Make a list of the lifestyle changes that are necessary to accomplish your goal. For instance, if your goal is to lose 10 pounds, you might want to make these changes in lifestyle: lower the fat intake in your diet, exercise at least three times a week and start eating a nutritious breakfast daily.

1.

2.

3.

4.

5.

Potential Roadblocks Try to anticipate any roadblocks or difficulties you may face in meeting your goal. Then think about how you will overcome these roadblocks to meet your goal.

1.

2.

3.

Evaluation To realize your goals, it is important to measure your progress at regular intervals. Make a list of the ways in which you will track your progress.

1.

2.

3.

4.

5.

Reward Rewarding positive changes in behavior is important. When I meet my goal, I will reward myself by .......

I agree to do my best to accomplish the goal of this contract during the time allotted.

name:

witness:

date:

Consider the following situations, and answer each of the following multiple-choice questions. Indicate your answer next to each question. Possible answers are: A = it increases; B = it decreases; C = it stays the same; D = not enough information to say for sure. “Increase” or “decrease” refers to the numerical value of a variable, not its interpretation as stringent or lenient. Assume that nothing else about the data changes besides the factor(s) listed in the problem. No need to explain or justify your answers.F. What happens to the likelihood of rejecting the null hypothesis for any F test when S_W² increases?

F. What happens to the likelihood of rejecting the null hypothesis for any F test when S_W² increases?

G. What happens to c²_crit when alpha decreases in value from .05 to .01?

H. What happens to c²_obt as the observed frequencies in each cell diverge less and less from the expected counts?

I. What happens to c²_crit when the number of levels of both independent variables increase?

J. What happens to the power of an analysis when a non-parametric rank-order back-up test (like the Mann-Whitney U test) is used instead of its parametric counterpart (like an unpaired t test), assuming the assumptions of the parametric test were met?

K. If a Pearson correlation coefficient is negative, what happens to r² when the Pearson r becomes even more negative?

L. When only the units used to measure X and Y change (like from inches to centimeters) – but not the actual data – what happens to the value of the Pearson r?

M. In simple linear regression, if the Pearson correlation changes from 0 to a positive number, what happens to the slope of the best-fit line?

N. In simple linear regression, if the Pearson correlation changes from 0 to a negative number, what happens to the slope of the best-fit line?

1. Activity Based Costing

Duncan Company recently introduced a markers to complement their other product, pencils. Accountants accumulate all overhead in a single cost pool and allocate it based on machine-hours. With the recent addition of an expanded computer system, Duncan decided to begin implementing ABC. A study reveals much overhead cost related to machine setups and batch changes. They select the number of setups and the number of batch changes as the activity driers for the two new cost pools. They will continue to use machine-hours as the base for allocating all remaining overhead. Accountants provide the following information about Duncan Company’s most recent year of operations:

                                                                Pencils                      Markers                              Total

Units produced                                           5,000 1,000                            6,000

Direct material cost per unit               $            5 $      3                  

Direct labor cost                                    200,000 $300,000                     $500,000

Machine hours                                           4,000 6,000                          10,000

Machine setups                                               30 50                                 80

Batch changes                                               300 700                            1,000

Overhead:

            Machine setup-related                                                                                     $   200,000

            Batch-related                                                                                                        500,000

            Other                                                                                                               1,500,000

                                                                                                                                    $2,200,000

                                                                                                                                    ========   

Required:

Using the current costing system (Absorption costing), determine the total and unit cost for each product line.

Using the ABC costing system, determine the total and unit cost for each product line.

If you were the manager of the pencil department, which method would you prefer and why?

Product Costs using the Current Costing System

(Absorption Costing)

OHR =

                                 Pencils Markers Total

Direct Material       $                                              $ $

Direct Labor

Overhead                                         

(OHR x AV)

Total Cost            $ $ $

                                                                                      =======

÷Units produced                                          

Cost per unit

                             =======             =======            

Product Costs using the ABC Costing System

         OHR #1 = ____________ =                               

OHR #2 = ____________ =                               

OHR #3 = ____________ =                               

                                 Pencils              Markers               Total

Direct Material       $                                              $                                              $

Direct Labor

Overhead                                         

(OHR x AV)

Total Cost            $                           $                           $

÷Units produced =======

Cost per unit

       =======             =======

A large and persistent external deficit often leads to calls for policy measures such as bilateral trade negotiations, tariffs and important quotas, directed at restoring balance between exports and imports. However, current account deficits ultimately reflect a disparity between savings and investment; fundamental national income accounting identities ensure that the current account is equal not only to the difference between exports and imports, broadly defined, but also to the difference between savings and investment (Krugman 1991).

Therefore, the issue of how current account balance is achieved in practice can be viewed in terms of whether it is savings or investment that adjusts to an external imbalance. To the extent that a country that borrows from abroad does not default on its debt obligations, high current account deficits must eventually be followed by higher national savings or lower investment. In a series of influential articles, Feldstein (1992), argued that while, in the short run, inflows of foreign capital can offset the difference between national investment and national savings, in the long run, the rebalancing of the current account occurs mainly through changes in investment. This is because the country’s saving rate is, in the long run, predetermined by the household's attitudes toward savings and borrowing, by the fiscal incentives for private savings, and by the public attitude toward budget deficit.

As such, a country’s savings rate ultimately constrains the rate of investment; low levels of national savings lead, in the long run, to low levels of investment, with potentially important implications for a country's future standard of living. Feldstein’s preferred policy conclusion is that government measures aimed at raising a country’s savings rate will generate an almost one-for-one increase in its long-run investment rate.

While their ability of government to permanently raise a country’s savings rate remains highly controversial, it is still the case that solvency implies the permanent changes in savings or investment must lead to changes in the other variable of approximately the same amount.

That's all info and they ask:

How interest rate will change in response to A2 shock?

Suppose that the following equations govern planned spending in the US:
C = 500 + 0.75(Y-T)
T = 0.2Y – 800
I = 3000 – 64000r
G = 3200
NX = 1000 – 10e (e =“trade weighted” real ex. rate. As always, increase in e = $ appreciation)
NFO = 500 – 60000(r – r
FOR)
r
FOR = 3%
a) Explain how NFO responds to an increase in the Home interest rate, and an increase
r
FOR, based on the equation. What economics story does this coefficient represent?
b) We’re going to look at an increase in the home interest rate from 2.5% to 3%. First,
let’s take a look at the new international piece of the model. Calculate NFO, NX,
and the exchange rate for each value of the interest rate. Based on these numbers,
draw the NFO=NX graph for the interest rate increase, and talk through the
economics: how the change in interest rates changes NFO, and how that leads to
changes in the exchange rate and NX.
c) Now, combine the equations above to find an expression for AE, then impose the
Y=AE expression to derive the IS curve. As in lecture, work with AE = C + I + G
+NFO to end up with Y=f(r). Use your IS curve to calculate the level of short-run
GDP for the original interest rate of 2.5%, and the new interest rate of 3%.
d) Use the multiplier math framework (Final Chg GDP = Multiplier x Initial Chg in
Spending) to explain this change in GDP? The change in NX from part b is part of
this story, but don’t forget about our pre-PS5 domestic interest rate story – where
else does r show up?
e) It is often said that “monetary policy is stronger in an open economy.” Explain this
statement based on the “domestic” and “international” changes in GDP from part
d). I don’t just want the numbers side of things – what is the underlying economics
story for why monetary policy is more effective when the economy has an
international sector?

Need memo

Format: Facts, Issue, Analysis, Conclusion

Background

You are an audit senior for Burns & Allen, LLP. One of the audit partners received a call from Brenda Parker, CFO of a publicly traded client, Toys For U (“Toys”). Toys is a retailer with 25 locations and is expanding each year. Toys leases retail space on long-term leases ranging from 10 to 15 years. Most of the leases have multiple renewal options. Under current rules, the arrangements are reported as operating leases. Brenda read that changes are coming to reporting for leases and wants to prepare for the changes that will be required. The audit partner at your firm, Erica Dalton, has asked you to prepare a memo to the Toys for U audit file explaining the proposed changes to accounting for leases. She asked that you include an example in the memo.

Required

Write a memo to the “Toys R U Audit File.” Be sure to include the following:

Brief description of current reporting rules for leases

Description of proposed reporting rules for leases

Example of application of proposed rules for a lesseeAssume the following lease terms:

Identifiable Asset: Facility (building) lease

Term 10 years – assume no renewal option

Monthly lease payments beginning at $125,000 per month over the ten year lease term

The risk free rate is 2%, Toys R U borrows at an incremental rate of 6%, and the lessor rate is unavailable

Assume the lease commences on January 1, 2021 and the first payment is due February 1, 2021

Include the following journal entries:

Recording of lease related asset and liability at lease inception – use “Capitalized Lease Asset” and “Capitalized Lease Liability” as account titles

Recording of the monthly expense for the first two months – do each month separately

Attach an Excel worksheet to your memo with the following:

Calculation of the amount of the capitalized lease asset and related lease liability

An amortization schedule for the lease term

Discussion 5 - Controversy 5: Is Butter Really Back? The Lipid Guidelines Debate Using the information found at the end of Chapter 5 about the Controversy: Is Butter Really Back? The Lipid Guidelines Debate. Read first the content in the book, supplement the reading with the power point that emphasizes the main points of the controversy. Then, write a 200-250 word response of the controversy.

The Dietary guidelines for Americans had been emphasizing for decades on the importance of low fat eating. Great changes have been made in the production, and manufacturing of foods, and families have tried new low fat recipes, and lower their overall fat composition. But there is this new debate: besides all of the efforts to cut fat in the American diet, the efforts have been unsuccessful, and people have switched to add more sugar to their diets in order to keep the flavor that fats provided. So, do we need to go back to use more butter to cook, and manufacture foods, and snacks? Or, do we need to continue decreasing the amount of fat in our diets in order to decrease the risk for chronic diseases, especially for cardiovascular disease? In this context, while preparing your response keep in mind the following:

1. If fats are bad for people, why do we keep eating them? And, if fats are bad for people, what can we do in order to decrease the daily consumption of fat?

2. In your opinion, is the use of olive oil a good solution to start consuming healthier fats? And, about the use of fat substitutes such as apple sauce for baking? What do you do personally in order to have a low-fat diet?

3. What kind of lifestyle changes can be done in the U.S. population in order to decrease or, use in moderation the amount of fat in the diet, fast food restaurants, and snacks?

4. Application: share your own experience of trying to eat low fat and/or eating healthier in general. What kind of lifestyle changes have you had to make in order to eat healthy?

Vanessa wants to retire in 25 years with enough saved to be able to withdraw $5,000 monthly for 20 years. She has already accumulated $48,000 in her investment account. Assume that the rate of interest is 4.8% compounded annually for the 25 years of her contributions, and changes to 3.6% compounded monthly for the next 20 years. Determine what annual contributions she has to make for the next 25 years in order to meet her objective.

Tina sells short 1,200 shares of Alpha Inc. that are currently selling at $54 per share. She posts the 50% margin required on the short sale. Her broker requires a 30% maintenance margin. The firm pays no dividends. Tina earns no interest on the funds in her margin account. What is the rate of return on the investment if the price of Alpha stock changes from $54 to $47?