1) Identify the internal factor that influences the stock price of a firm.

a. Capital structure

b. Conditions in the stock market

c. Tax laws

d. Legal constraints

e. General level of economic activity

A low inventory turnover ratio might indicate that:

a. the firm is using the last-in first-out (LIFO) method of inventory valuation during inflationary periods.

b. the cost of inventory of the firm is lower than that of the similar firms.

c. the inventory of the firm is sold and restocked very often.

d. the firm purchases all its inventory on credit.

e. the firm is holding excess stocks of inventory.

A company has two different bonds currently outstanding. Both bonds have a face value of R100. Bond A matures in 10 years. The bond makes no coupon payments for the first four years and then pays R8.50 semi-annually for the subsequent four years, and finally pays R10.50 semi-annually for the last two years. Bond B also matures in 10 years; it makes coupon payments of R4.50 semi-annually over its life. The yield to maturity on both bonds is 12% per annum, compounded semi-annually.

What is the current price of each bond?

The firm Hill is planning to acquire Dale, another firm in the same industry. Relevant financial information for the two firms is shown below.

Both firms are financed entirely by equity. The acquisition will result in expected cost savings for the merged (post-acquisition) firm with a total present value of $38 million.

(a) Assume for this part of the question that Hill’s shares are valued at $4.50 each. How many new shares would Hill issue to Dale's shareholders in exchange for the whole 10.5 million of Dale's shares? What is the total value and price per share of the merged firm? Should Hill pay for the acquisition on this basis? Explain briefly.

Assume now that Dale's shareholders will agree to the acquisition for a premium of $4.05 million.

(b)What is the minimum number of shares Hill should offer, such that Dale's shareholders will participate in the acquisition?

(c) Assume Hill decides to acquire Dale by issuing the minimum number of shares as in part (b). In the first year the total earnings of the merged firm will be $15.87 million. Hill’s dividend payout ratio will be maintained in the merged firm. What change in dividend payment will a former Dale shareholder get in the first year of the merged firm, if they had 1000 shares in Dale before the acquisition?

(d)What does clientele theory predict about the relationship between a firm’s value and a change in its dividend policy? Does this theory have any implications for the success of the acquisition? Explain. (150 words)

Englehart Company sells two types of pumps. One is large and is for commercial use. The other is smaller and is used in residential swimming pools. The following inventory data is available for the month of March.

Accounting
(a) Assuming Englehart uses a periodic inventory system, determine the cost of inventory on hand at March

31 and the cost of goods sold for March under first-in, first-out (FIFO).

(b) Assume Englehart uses dollar-value LIFO and one pool, consisting of the combination of residential and commercial pumps. Determine the cost of inventory on hand at March 31 and the cost of goods sold for March. Assume Englehart’s initial adoption of LIFO is on March 1. Use the double-extension method to determine the appropriate price indices. (Hint: The price index for February 28/March 1 should be 1.00.) (Round the index to three decimal places.)

Analysis
(a) Assume you need to compute a current ratio for Englehart. Which inventory method (FIFO or dollar-

value LIFO) do you think would give you a more meaningful current ratio?

(b) Some of Englehart’s competitors use LIFO inventory costing and some use FIFO. How can an analyst compare the results of companies in an industry, when some use LIFO and others use FIFO?

Principles

Can companies change from one inventory accounting method to another? If a company changes to an inventory accounting method used by most of its competitors, what are the trade-offs in terms of the conceptual framework discussed in Chapter 2 of the textbook?

The firm Hill is planning to acquire Dale, another firm in the same industry. Relevant financial information for the two firms is shown below.

Both firms are financed entirely by equity. The acquisition will result in expected cost savings for the merged (post-acquisition) firm with a total present value of $38 million.

(a) Assume for this part of the question that Hill’s shares are valued at $4.50 each. How many new shares would Hill issue to Dale's shareholders in exchange for the whole 10.5 million of Dale's shares? What is the total value and price per share of the merged firm? Should Hill pay for the acquisition on this basis? Explain briefly.

Assume now that Dale's shareholders will agree to the acquisition for a premium of $4.05 million.

(b)What is the minimum number of shares Hill should offer, such that Dale's shareholders will participate in the acquisition?

(c) Assume Hill decides to acquire Dale by issuing the minimum number of shares as in part (b). In the first year the total earnings of the merged firm will be $15.87 million. Hill’s dividend payout ratio will be maintained in the merged firm. What change in dividend payment will a former Dale shareholder get in the first year of the merged firm, if they had 1000 shares in Dale before the acquisition?

(d)What does clientele theory predict about the relationship between a firm’s value and a change in its dividend policy? Does this theory have any implications for the success of the acquisition? Explain. (150 words)

(Total = 25 marks)

On January 1, 2018, Bradley Recreational Products issued $125,000, 10%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $ 117,237 to yield an annual return of 12%. ( use FV of 1$, PV of 1$ etc…..)

Required:

1. Prepare an amortization schedule that determines interest at the effective interest rate. (Enter your answers in whole dollars.)

Payment Number Cash Payment Effective Interes t Increase in Balance Carrying Value

1

2

3

4

5

6

7

8

Totals

2. Prepare an amortization schedule by the straight-line method. Payment Number Cash Payment Recorded Interest Increase in Balance Carrying Value 1 2 3 4 5 6 7 8 Totals 3. Prepare the journal entries to record interest expense on June 30, 2020, by each of the two approaches. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

a. Record interest expense on June 30, 2020, by the effective interest method.

b. Record interest expense on June 30, 2020, by the straight-line method.

4. Assuming the market rate is still 12%, what price would a second investor pay the first investor on June 30, 2020, for $15,000 of the bonds? (Round your intermediate calculation and final answer to whole dollars.)

Price of the bonds …..?

You have recently graduated from school and have started your new job at a Consulting LLC. You have been given the following assignment. You are to present an investment analysis of a new residential income producing property an investor is considering purchasing. The asking price for the property is $1,200,000; rents are estimated at $201,000 during the first year and are expected to grow at 3.5% per year thereafter. Vacancies and collection losses are expected to be 11 percent of rents. Operating expenses will be 35% of effective gross income. A 70% loan can be obtained at 11% interest for 30 years. The property is expected to appreciate in value at 3% per year and will be sold in 5 years. You determine that the building represents 90% of value and would be depreciated over 39 years (use 1/39th per year). The potential investor indicates that she is in the 36% tax bracket and has enough passive income from other activities so that any passive losses from this activity would not be subject to any passive activity loss limitations. Capital gains from price appreciation will be taxed at 20% and depreciation recapture will be taxed at 25%. The discount rate is 14%. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)?

What is the investor’s expected after-tax internal rate of return on equity invested (ATIRR)?

What is the first year debt coverage ratio?

What is the terminal capitalization rate?

*There is no balance sheet given in this problem*

PLEASE PROVE DETAILS - THANK YOU

Stillwater Manufacturing, Inc. was formed on January 1 by issuing 100,000 shares of $1 par value stock for $250,000.

On that same date, Stillwater Manufacturing, Inc. acquired a piece of machinery and a truck as part of one purchase for $200,000 cash. The machine had a list price of $161,000 and the truck had a list price of $69,000.

Freight cost amount to $1,300 for the machinery only. There was no delivery charge associated with the truck. The company had to hire a specialist to calibrate the machine. The specialist’s fee was $900.

The machine operator is paid an annual salary of $50,000. The employee that will drive the truck is paid an annual salary of $75,000. The cost of the company’s theft insurance policy increased by $600 per year as a result of acquiring the machine.

The machine has a 10-year useful life and an expected salvage value of $15,000.

The truck has a 5-year useful life and an expected salvage value of $19,000.

Record the above transactions related to the (1) issuance of common stock, (2) purchase of the machine and truck (include all costs that should be capitalized), (3) depreciation on the machine for the first full year of operation, and (4) depreciation on the truck for the first full year of operation.

What is the net amount of property, plant, and equipment that will appear on Stillwater Manufacturing’s balance sheet at the end of this year?

$______________________

Unipart, a manufacturer of auto parts, is considering two B2B (Business-to-Business) marketplaces to purchase its MRO (Maintenance, Repair, and Operating) supplies. Both marketplaces offer a full line of supplies at very similar prices for products and shipping. Both provide similar service levels and lead times. However, their fee structures are quite different. The first marketplace, Parts4u.com, sells all of its products with a 5 percent commission tacked on top of the price of the product (not including shipping). AllMRO.com’s pricing is based on a subscription fee of $10 million that must be paid up front for a two-year period and a commission of 1 percent on each transaction’s product price. Unipart spends about $150 million on MRO supplies each year, although this varies with their utilization. Next year will likely be a strong year, in which high utilization will keep MRO spending at $150 million. However, there is a 25 percent chance that spending will drop by 10 percent. The second year, there is a 50 percent chance that the spending level will stay where it was in the first year and a 50 percent chance that it will drop by another 10 percent. Unipart uses a discount rate of 20 percent. Assume all costs are incurred at the beginning of each year (so Year 1 costs are incurred now, and Year 2 costs are incurred in a year). From which B2B marketplace should Unipart buy its parts? (Hint: calculate the NPV cost incurred) PROCEDURE NEEDED (Excel or Paper Calculations)

Chapter 6 Patricia’s Fabrics sells sewing machines and fabrics. On December 31, 2016, Patricia’s inventory amounted to $690,000. During the first week in January 2017 the company made only one purchase and one sale. These transactions were: Jan. 4 Purchased 20 sewing machines and 80 bolts of fabric from Consolidated Sewing. The total cost was $44,000, terms are 3/10, n/60. Jan. 7 Sold several sewing machines and a variety of fabrics on account to Vasquez Furniture Reupholsters. The total sales price was $29,000, terms are 2/10, 1/30, n/60. The total cost of the sewing machines and fabrics to Patricia’s was $14,500 (net of the purchase discount). Patricia’s records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory and accounts payable. They use a periodic inventory system. Required: 1. Prepare journal entries to record these transactions, assuming that Patricia’s uses a perpetual inventory system. 2. What is the balance in the inventory account at the close of business on January 7th? 3. Prepare journal entries to record the two transactions. 4. What is the cost of goods sold for the first week of January? 5. What is the gross profit margin on the January 7th sale to Vasquez Furniture Reupholsters? 6. If Patricia’s pays their invoice on January 8th, how much will they pay? If Vasquez pays their invoice on January 14th, how much will they pay?