Kemmerer Pen, a manufacturer of stationary, is considering a new investment that
requires the use of an existing warehouse, which the firm acquired four years ago for $2
million but is currently redundant (unused).
• The warehouse’s market rental price is $200,000 (pre-tax) per year at year zero.
• Rental price for the warehouse will increase at a growth rate of 5% from year 1 to
year 5.
• In addition to using the warehouse, the project requires an up-front investment into
machines and other equipment of $6 million. This investment can be fully
depreciated straight-line over the next six years for tax purposes with a salvage
value of 0.
• However, the company expects to terminate the project at the end of five years and
to sell the machines and equipment for $1.5 million.
• The project requires an initial investment (incur at Year 0) into net working capital
equal to 5% of predicted first-year sales. Subsequently, net working capital is 5%
of the predicted sales over the following year but will be fully recovered at the
end of year 5.
• Sales of pens are expected to be $5 million in the first year and to stay stable for
five years. Total manufacturing costs and operating expenses (excluding
depreciation) are 60% of sales. And profits are taxed at 30%.

a) What are the free cash flows of the project from Year 0 to Year 5 respectively? (6
marks). If the cost of capital is 10%, what is the NPV of the project?

b) If a borrowing interest payment of $600,000 for this project is made per year
during the investing period, will it change Kemmerer Pen’s investment decision?

Review the following? long-term, available-for-sale security transactions of Roya Department? Stores:

a. Purchased 460 shares of Potter Fine Foods common stock at $ 32 per? share, with the intent of holding the stock for the indefinite future.

b. Received a cash dividend of $ 1.60 per share on the Potter Fine Foods investment.

c. At? year-end, adjusted the investment account to fair value of $ 39 per share.

d. Sold the Potter Fine Foods stock for the price of $ 20 per share.

Requirement

Journalize the? long-term, available-for-sale security transactions of Roya Department Stores.

(accounts to choose from in a-d are Allowance to adjust investment in AFSS to market, Cash, Dividend revenue, Gain on sale of investment in AFSS, investment in AFSS, Loss on Sale of investment in AFSS, Unrealized gain on investment in AFSS, and Unrealized loss on investment in AFSS)

a) Purchased 460 shares of Potter Fine Foods common stock at $32 per? share, with the intent of holding the stock for the indefinite future. ?(Abbreviation used:? AFSS, Available-for-sale securities. The company uses an allowance account to adjust available for sale investments to fair value. Record debits? first, then credits)

b) Received a cash dividend of $1.60 per share on the Potter Fine Foods investment.

c) At? year-end, adjusted the investment account to fair value of $39 per share.

d)Sold the Potter Fine Foods stock for the price of $20 per share.

-?First, prepare the journal entry to record any necessary eliminations.?

-Then journalize the sale.

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? Suggested presentation: please use Perpetual inventory system!

Additional Information for All Question: Return on market is 10%, return on T-bills is 4%, and companies pay 40% corporate tax and 30% capital gains tax.

Greenleaf Inc. is a newly incorporated firm that requires $500 million in capital; and is raising capital through debt and equity only. The firm is comparing one of two options on capital raising.

Option A: The firm raises $200million through issuing bonds and $300 million through issuing 600,000 (0.6million) ordinary shares. Each bond offers a semi annual coupons of $26.0485, has a par value of $200, matures in 10 years, and offers a YTM of 10% to its investors. The firm is to offer an expected dividend of $0 at the end of the first year, and offers ordinary shareholders a return of 14.92% per year.

Option B: The firm raises a total of $500 million by issuing 1 million bonds and 500,000 (0.5million) ordinary shares. Each bond costs $250, offers semiannual coupons, has a par value of $200, matures in 10 years, and offer a YTM of 11% to its investors. Each ordinary share costs $500.

Q1. (a) Option A: Calculate the price of each bond and the number of bonds that need to be issued to raise $200 million.

     (b) Option B: Calculate the price of each share, and hence, the expected dividend $0 (correct to 4 decimal prices) at the end of the first year.

     (C) Option C: Calculate the coupon rate offered to bond Investors.

Refer to the table below and calculate both the real and nominal rates of return on the TIPS bond in the second and third years. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Suppose that today’s date is April 15. A bond with a 9% coupon paid semiannually every January 15 and July 15 is quoted as selling at an ask price of 1,015.000. If you buy the bond from a dealer today, what price will you pay for it? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 8.5% and face value $1,000. Find the imputed interest income in the first, second, and last year of the bond's life. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Masters Corp. issues two bonds with 18-year maturities. Both bonds are callable at $1,075. The first bond is issued at a deep discount with a coupon rate of 6% to yield 11.3%. The second bond is issued at par value with a coupon rate of 12.50%

The GFA Company, originally established 16 years ago to make football, is now a leading
producer of tennis balls, baseballs, footballs, and golf balls. Nine years ago, the company
introduced “High Flite,” its first line of high-performance golf balls. GFA management has
sought opportunities in whatever businesses seem to have some potential for cash flow. Recently
Mr. Dawadawa, vice president of the GFA Company, identified another segment of the sports
ball market that looked promising and that he felt was not adequately served by larger
manufacturers.
As a result, the GFA Company investigated the marketing potential of brightly coloured bowling
balls. GFA sent a questionnaire to consumers in three markets: Accra, Kumasi, and Koforidua.
The results of the three questionnaires were much better than expected and supported the
conclusion that the brightly coloured bowling balls could achieve a 10 to 15 percent share of the
market. Of course, some people at GFA complained about the cost of test marketing, which was
GH¢ 250,000. Also, the feasibility test carried out by analysts to assess the viability of the
project costs GH¢ 100,000. In any case, the GFA Company is now considering investing in a
machine to produce bowling balls. The bowling balls would be manufactured in a building
owned by the firm and located near Madina. This vacant building and the land can be sold for
GH¢ 150,000 after taxes.
Working with his staff, Dawadawa is preparing an analysis of the proposed new product. He
summarizes his assumptions as follows: The cost of the bowling ball machine is GH¢100,000
and it is expected to last five years. At the end of five years, the machine will be sold at a price
estimated to be GH¢ 30,000. The machine is depreciated on straight-line basis. The company is
exempt from capital gains tax. Production by year during the five-year life of the machine is
expected to be as follows: 5,000 units, 8,000 units, 12,000 units, 10,000 units, and 6,000 units.
The price of bowling balls in the first year will be GH¢20. The bowling ball market is highly
competitive, so Dawadawa believes that the price of bowling balls will increase at only 2 percent
per year, as compared to the anticipated general inflation rate of 5 percent.
Conversely, the plastic used to produce bowling balls is rapidly becoming more expensive.
Because of this, production cash outflows are expected to grow at 10 percent per year. First-year
production costs will be GH¢10 per unit. Also, „Soft Flite‟ a substitute product, is expected to
have a drop in its sales by 1000 units per annum. The selling price per unit of existing products is
GH¢5 while the variable cost is GH¢ 4. This has no tax implications for the new product.
Dawadawa has determined, based on GFA‟s taxable income, that the appropriate incremental
corporate tax rate in the bowling ball project is 34 percent.

TzeMay was one of the first women engineering students at ABC University. She graduated in 1995 with a first class honours degree and immediately continued her studies with an MSc programme, gaining recognition for her work into environmentally friendly car engines, a largely untapped field in those days. On completion of her Masters degree she was offered a post as a research assistant where she could have developed her Masters research and worked towards her doctorate. However she decided that she needed to gain some commercial experience and joined Wallace-Price, a blue-chip engineering consultancy where, apart from a sponsored year out to study for an MBA in the United States of America, she has remained ever since.

Her tenacity and loyalty to Wallace-Price have paid off and she was made a partner in the firm, primarily responsible for bringing in work to the consultancy. With the promotion came various executive privileges including an annual salary of £80, 000, a chauffeur-driven car, free use of one of the company-owned London flats, a non-contributory pension scheme, various gold credit cards and first-class air travel. TzeMay herself would not describe these as benefits, however, but as necessities to enable her to do her job properly. In order to meet her business target of £2 million of work for Wallace-Price she spent forty weeks overseas, working an average of ninety hours a week.

She cannot remember the last time that she had a weekend when she was not entertaining clients or travelling but was totally free to indulge herself. During her time with Wallace-Price she has earned a reputation both as a formidable but honest negotiator and as an innovative engineer, often finding seemingly impossible solutions to problems. Known for her single-minded dedication to her job, she does not suffer fools gladly. She is frequently approached to work for rival firms with promises of even greater privileges and has been the subject of numerous magazine profiles, some concentrating on her work and reputation as a high flier but the majority focusing on her gender. Her fortieth birthday last year was spent alone in the Emergency Room of a Los Angeles hospital where she had been rushed with a suspected stomach ulcer. Deprived of her portable telephone, fax and computer she had little else to do but to reflect on her life thus far. On her return to health she was working her way through the pile of technical journals, which had accumulated during her absence and there she saw the advertisement for ABC University, an institution that had close links with her company and whose Professor of Engineering she knew well. Ignoring the instructions relating to applications she put through a telephone call to the ABC University.

Question 1 : Making reference to the appropriate theories of motivation, explain TzeMay‟s main motivating factors.

Need explanation how these values are found using algebra, answers needing to be a percentage; "r" is the forward rate:  

1 year coupon: $97=100/(1+r₁)¹

2 year coupon: $94= 100/(1+r₂)²

3 year coupon: $93= 100/(1+r₃)³

4 year coupon: $90= 100/(1+r₄)⁴

if you have an allowance for doubtful accounts for 100 that you asign an expense to at the beginning of the year also for 100 (Bad Debt Expense), what happens with expenses if you made a wrong calculation? supposedly you already debited Bad Debt Expense for 100, can you increase it if write offs amount to more than 100 over the year ? What is the whole process ?

Consider a project with an initial outlay of $1,000 and yearly cash flows as follows: -300, -100, 200, 300, 300, 100, 100, 200, 600, 400, and 100. Calculate the classical payback period assuming 10% cost of funds. Round your final answer to two decimal places. (please show step-by-step using formulas) (NEED ANSWER ASAP)