Mr. Hunter, CEO of MT Mining Company (MTMC), received a report from the engineering department. The report describes a proposed new mine on the North Ridge of MT. A gold mine had been discovered on the land owned by MTMC. The land is now leased to another company for $300,000 a year. The lease is going to expire but can be renewed with the same condition. Tests indicated that this mine can produce 90,000 ounces gold for the first year and the production can increase 10 percent for the next four years then decreases 15 percent for next three years. The resources will be exhausted by the end of the eighth year. MTMC is currently very conservatively financed. Mr. Hunter believes that MTMC can raise $60 million by issuing bond with 9 percent coupon interest rate. However, when the bond is issued, the market interest can fluctuate in the range of 7% to 11%. The initial cost of the project includes the purchase of necessary machinery ($50 million), one-time environmental protection fee of $2.5 million, and designing fee of $6.5 million. The project needs $1 million as working capital. The fixed operating cost of the mine is $850,000 per year. The mine needs to hire 20 engineers and managers, 200 workers at the beginning of the project. The average salary for engineers and managers is $40,000 for the first year and average wage for workers is $25,000 for the first year. Both salaries and wages will increase at a constant rate of 10%. The contracts signed with 10 of the engineers and managers are for four years. Starting from year 4, each year 20 workers will be transferred to other mines. The variable cost (excluding wages and salaries) for producing gold is $1.5 per ounce. The machines will be depreciated by MACRS. According to MT Environment Protection Law, the mine must restore the site to its original environment condition. It is estimated that the cost of restoration will be $1.5 million. When the restoration is finished, the government will return $2 million of environmental fee. The current price of gold is $300 per ounce. As for the gold price by the time when the project starts, there are three different opinions about the gold price in the future. Most people believe the price will remain the same as the present price. Optimists believe that the gold price will increase 10% while pessimists predict that gold price will further decline by 5%. MTMC is in the 35% tax bracket. Now you are hired as CFO of MTMC. Mr. Hunter is asking you to make a project analysis and make a presentation to the board of directors within a week.

The CEO of Kuehner Development Company has just come from a meeting with his marketing staff where he was given the latest market study of a proposed new shopping center. The study calls for a construction phase of 1 year, and a subsequent operation phase. This question focuses largely on the construction phase.
The marketing staff has chosen a 12-acre site for the project that they believe they can acquire for $2.25 million. The initial studies indicate that this shopping center will have gross building area (GBA) of 190,000 sq. ft.
The head of the construction division assures the CEO that hard costs will be kept to $54 per sq ft. of GBA, and soft costs (excluding interest carry and loan fees) will be kept to $4.50 per square foot of GBA. Site improvements will cost $750,000.
The Shawmut Bank has agreed to provide construction financing for the project. The bank will finance the construction costs (hard and soft) and the site improvements at an annual rate of 13%. They will also charge a loan-commitment fee of 2% of the total balance.
The construction division estimates that 60 percent of the financed construction costs will be taken down evenly during the first six months of the construction project. The remaining 40 percent will be taken down evenly during the last six months.

a. What are the total construction costs that the bank is willing to finance?

b. Given the terms of the construction loan, what will be the total interest carry for the shopping center project?

c. What will be the total amount that Kuehner must borrow (Hint: remember to include interest carry)?

d. How much equity does Kuehner need to put into the project?

e. Acme Insurance Co. agrees to provide permanent financing for the project and “take-out” the construction loan at the end of 1 year. They agree to provide a fully amortizing mortgage with a 20 year maturity at a 12 percent annual interest rate. What is the monthly debt service that Kuehner will have to make once construction is complete and operations begin?

The CEO of Kuehner Development Company has just come from a meeting with his marketing staff where he was given the latest market study of a proposed new shopping center. The study calls for a construction phase of 1 year, and a subsequent operation phase. This question focuses largely on the construction phase.
The marketing staff has chosen a 12-acre site for the project that they believe they can acquire for $2.25 million. The initial studies indicate that this shopping center will have gross building area (GBA) of 190,000 sq. ft.
The head of the construction division assures the CEO that hard costs will be kept to $54 per sq ft. of GBA, and soft costs (excluding interest carry and loan fees) will be kept to $4.50 per square foot of GBA. Site improvements will cost $750,000.
The Shawmut Bank has agreed to provide construction financing for the project. The bank will finance the construction costs (hard and soft) and the site improvements at an annual rate of 13%. They will also charge a loan-commitment fee of 2% of the total balance.
The construction division estimates that 60 percent of the financed construction costs will be taken down evenly during the first six months of the construction project. The remaining 40 percent will be taken down evenly during the last six months.
a. What are the total construction costs that the bank is willing to finance?

b. Given the terms of the construction loan, what will be the total interest carry for the shopping center project?

c. What will be the total amount that Kuehner must borrow (Hint: remember to include interest carry)?

d. How much equity does Kuehner need to put into the project?

e. Acme Insurance Co. agrees to provide permanent financing for the project and “take-out” the construction loan at the end of 1 year. They agree to provide a fully amortizing mortgage with a 20 year maturity at a 12 percent annual interest rate. What is the monthly debt service that Kuehner will have to make once construction is complete and operations begin?

A CEO wondered if her company received either more or less complaints from its workers on Monday than any other day. She figured that if it were truly random, 20% of the complaints should have been filed on Monday. She randomly selected 50 complaints and checked the day that they were submitted. In those complaints 13 were submitted on a Monday.

The CEO conducts a one-proportion hypothesis test at the 5% significance level, to test whether the true proportion of complaints submitted on a Monday is different from 20%.

(a) H0:p=0.2; Ha:p≠0.2, which is a two-tailed test.

(b) Use Excel to test whether the true proportion of complaints submitted on a Monday is different from 20%. Identify the test statistic, z, and p-value from the Excel output, rounding to three decimal places.

Which of the following is not considered a permanent difference?

a. Interest received on municipal bonds.

b. Stock-based compensation expense.

c. Fines resulting from violating the law.

d. Premiums paid for life insurance on a company's CEO when the company is the beneficiary.

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data:

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 1% level of significance. Will you use a left tailed, right tailed, or two tailed test?

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data:

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Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Assume that the distribution of differences is approximately normal, mound-shaped and symmetric. Use a 5% level of significance. What is the alternate hypothesis?

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"Acquisitions" Please respond to the following: Use the Internet or Strayer online database to research a publically traded company that recently acquired another company. Analyze the performance of the combined company, and ascertain at least two (2) benefits that the combined companies gained from the acquisition.

Conrad Playground Supply underwent a restructuring in 2021. The company conducted a thorough internal audit, during which the following facts were discovered. The audit occurred during 2021 before any adjusting entries or closing entries are prepared.

1. Additional computers were acquired at the beginning of 2019 and added to the company’s office network. The $49,500 cost of the computers was inadvertently recorded as maintenance expense. Computers have five-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method.
2. Two weeks prior to the audit, the company paid $21,500 for assembly tools and recorded the expenditure as office supplies. The error was discovered a week later.
3. On December 31, 2020, merchandise inventory was understated by $87,000 due to a mistake in the physical inventory count. The company uses the periodic inventory system.
4. Two years earlier, the company recorded a 4% stock dividend (2,900 common shares, $1 par) as follows:

The shares had a market price at the time of $12 per share.

5. At the end of 2020, the company failed to accrue $122,000 of interest expense that accrued during the last four months of 2020 on bonds payable. The bonds, which were issued at face value, mature in 2025. The following entry was recorded on March 1, 2021, when the semiannual interest was paid, as well as on September 1 of each year:

6. A three-year liability insurance policy was purchased at the beginning of 2020 for $74,700. The full premium was debited to insurance expense at the time.

Required:
For each error, prepare any journal entry necessary to correct the error, as well as any year-end adjusting entry for 2021 related to the situation described. (Ignore income taxes.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)