For all the following, consider the company, XYZ Inc.

a.         It’s preferred stock pays a dividend of $1.00. If you require a return of 10 percent, what is the most you would pay for their preferred stock today?

b.         Preferred stock is ok, but you really want common stock because of the growth potential. Consider that XYZ just paid a regular dividend of $4. If the required return on equity is 20 percent, what is the most you’d pay for their common stock if you expect the dividend to grow at 10 percent per year?  

c.         After the market closed today, XYZ announced that it will reduce its dividend next year by 75% and by 50% the following year (based on the $4 just paid). Growth is expected to bounce back 50% in the third year, then resume its 10% annual growth rate indefinitely. What is the most you would pay for XYZ common stock when the market opens tomorrow morning?

d.         Closely examine the model you are using to calculate the stock value. List five (5) major factors that the company can control that directly influence the value of its stock in this model. That is, as CEO what can you control?

Deep River College is a two-year school in Southern California. Twice a year, the fundraising office at Deep River mails requests for donations to the alumni. The staff uses a word processing program and a personal information database to create personalized letters. Data on past contributions and other alumni information, however, is stored manually. The dean, Alexandra Ali, recently submitted a systems request asking the college’s IT department to develop a computerized alumni information system. The school does not have a formal systems review committee, and each department has an individual budget for information services. Eddie Bateman, a systems analyst, performed a preliminary investigation and he concluded that the system met all the feasibility tests. After reading his report, Alexandra asked him to proceed with the systems analysis phase.

(1) Design a questionnaire to learn how the current process works and what the information requirements for the new information system would be. Your questionnaire should include the three types of questions discussed in the textbook.

It should contain:

six closed-ended questions, five opinion questions, and one question requesting an explanation of a procedure or problem.

[Hint: use the one question to explain the procedure, and close-ended questions to learn the information requirements]

MAJOR CASE STUDY

You have commenced work at Alfred’s Accountants, and Alfred has given you a series of tasks to perform.

The first task is as follows:

Alfred hands you a pre-adjustment trial balance of an organisation known as Radcliffe Rifles and a series of notes about Radcliffe Rifles. He then asks you to undertake a series of tasks:

RADCLIFFE RIFLES

Pre-Adjustment Trial Balance as at 30 June 2020

The following transactions have not yet been entered in the accounts.

• Depreciation of equipment is to be charged at the rate of 1% per annum on cost.
• Prepaid Rent expired during the period $5600.
• A customer paid a deposit of $5000, inventory will be delivered on 5 July 2020.
• Wages owing at 30 June 2020 were $850.
• Accounts payable paid $12500.
• Prepaid annual insurance $1200, policy commencing from 1 July 2020.
• Accounts receivable collected 7500.
• On 30 June 2020 office supplies on hand $400.
• Radcliffe Rifles rented out the basement of the premises for $2000 per month. The tenant has not yet paid the June rent.
• Bad debt written off $500.

Task 1.

Required:

Mr Alfred instructs you to prepare the journal entries necessary to record above transactions in the General Journal as at 30 June 2020. Narrations are not required.   

Task 2

Required:

Mr Alfred instructs you to prepare an Income Statement for the 6 months ending 30 June 2020.

Task 3

Required:

Mr Alfred instructs you to prepare a fully classified Balance Sheet (using a narrative or T form) as at 30 June 2020. (Note: must use a standard Balance Sheet format with appropriate headings)

On January 1, 2020, Aumont Company sold 12% bonds having a maturity value of $500,000 for $537,907, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Aumont Company allocates interest and unamortized discount or premium on the effective-interest basis. Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

a.Prepare the journal entry at the date of the bond issuance

b.Prepare a schedule of interest expense and bond amortization for 2020–2022.

c.Prepare the journal entry to record the interest payment and the amortization for 2020.

d.Prepare the journal entry to record the interest payment and the amortization for 2022.

Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare a schedule of interest expense and bond amortization for 2020–2022. (Round answer to 0 decimal places, e.g. 38,548.)

Prepare the journal entry to record the interest payment and the amortization for 2020. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the interest payment and the amortization for 2022. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.

a. What was the price of this bond when it was issued?

b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?

Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.

a. What was the price of this bond when it was issued?

b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?

No Excel Please

Suppose that the government enacts a tax on retail sales of road salt, which homeowners and businesses put on walkways and driveways. Assume that the supply of salt is perfectly elastic, due to the ease with which suppliers can stockpile the product.

Before the tax, 1000 fifty-pound bags of road salt are sold at an equilibrium price of $6.5 per bag. After the tax, 775 bags are sold at $8 per bag. How much revenue does the tax generate for the government?

What is the amount of the tax? $    per bag