Lease DataYearly rental: $3,057.25

Lease term: 3 years

Estimated economic life: 5 years

Purchase option: $3,000 at end of 3 years, which approximates fair value

Renewal option: 1 year at $1,500; no penalty for nonrenewal; standard renewal clause

Fair value at commencement: $10,000

Cost of asset to lessor: $8,000

Residualvalue:

Guaranteed: $0

Unguaranteed: $3,000

Lessor's implicit rate (known by the lessee)12%Estimated fair value at end of lease: $3,000

1 . Briefly discuss the impact of the accounting for this lease as a finance or operating lease for two common ratios: return on assets and debt to total assets.

2.What fundamental quality of useful information is being addressed when a company like Salaur capitalizes all leases with terms of one year or longer?

Your insurance company has converged for three types of cars. The annual cost for each type of cars can be modeled using Gaussian (Normal) distribution, with the following parameters: (Discussions allowed!)

• Car type 1 Mean=$520 and Standard Deviation=$110
• Car type 2 Mean=$720 and Standard Deviation=$170
• Car type 3 Mean=$470 and Standard Deviation=$80

Use Random number generator and simulate 1000 long columns, for each of the three cases. Example: for the Car type 1, use Number of variables=1, Number of random numbers=1000, Distribution=Normal, Mean=520 and Standard deviation=110, and leave random Seed empty.

Next: use either sorting to construct the appropriate histogram or rule of thumb to answer the questions:

13. What is approximate probability that Car Type 3 has annual cost less than $550?

• a. Between 1% and 3%
• b. Between 27% and 39%
• c. Between 75% and 90%
• d. None of these

14. Which of the three types of cars is most likely to cost less than $400?

• a. Type 1
• b. Type 2
• c. Type 3

15. For which of the three types we have the highest probability that it will cost between $500 and $700?

• a. Type 1
• b. Type 2
• c. Type 3

CORPORATE FINANCE: USE THE INFORMATION PROVIDED IN CASE STUDY PART ONE TO ANSWER THE QUESTIONS IN CASE STUDY PART TWO    Case Study-Part One

A.    From the company you selected, provide the following core business information and characteristics:

1. The company name and ticker symbol. Duke Energy Corporation (DUK)

2. Provide a brief description of this company and the type of product and/or services it provides. If it is a diversify entity, please provide a general description of its operations. Duke is the largest electric power company in the US, serving Americans since 1904

3. Identify the core business of the company. Duke core business is to drive its value going forward

4. Identify the management structure of the company. This can be done by simply pasting the corporate structure flowchart. The flowcharts are located on the next pages

5. Identify the market in which this company is publicly traded. NASDAQ

6. Identify the country in which this company operates (if it is a Multinational Corporation just say Multinational Corporation). Duke Energy Corporation only operates in the United States

7. Identify the major business and financial risk the company faces along with any major competitors if any.

8. Identify any regulatory or legal institutions that this company is subject to.

    (a) Code of Business Ethics (b) Principles of Corporate Governance (c) Board of Directors    (d) Stock Ownership Guidelines Policy (e) Security Trading Policy (f) Regulation FD Policy (g) Related   Person Transaction Policy (h) Political Participation (i) Political Expenditures Policy (j) Principles for Health Care Reform (k) Board Committee Charters

B. From the company you selected, present the following financial information for year-end 2017:

1. What is company’s total market capitalization? $53.27 Billions

2. What is the company’s book value amount? $59.63 (As of December 2017)

3. What is the company’s total amount of outstanding liabilities? $96,175,000

4. What is the company’s total amount of assets outstanding? $137,914,000

5. What is the total amount of long-term debt outstanding? $49,035,000

6. What is the total amount of common equity outstanding? ($67,000)

7. What was the company’s total year-end resulting net income? $3,059,000

8. What is the effective year-end taxes paid by this company? $1,196,000

9. What was the company’s total year-end amount of reported earnings? If it is the same as total net income, the just state total net income. $3,059,000

10. What was the total year-end amount of dividends declared by this company?     A cash dividend payment of $0.89 per share was scheduled to be paid on December 18, 2017. This represents an 4.09% increase over prior dividend payment.

11. What was the year-end dividend retention policy by this company? At the current stock price of $91.09, the dividend yield is 3.91%

12. What was total year-end amount of dividends paid, if any, by this company? $0.890

13. Identify the total year-end amount of shares outstanding. DUK's current earnings per share, an indicator of a company's profitability, is $3.37. Investment Research reports DUK's forecasted earnings growth in 2017 as -2.03%, compared to an industry average of 4.4%.

C. From the company you selected, present the following financial and valuation metrics for year-end 2016:

1. What was the current market stock price for this company? You could also use the 2016-year end average price or the year-end closing price. If you do so, please state what market stock price you are using. payment. At the current stock price of $86.12, the dividend yield is 4.13%.

2. What is the company’s year-end earnings per share (EPS)? 4.36

3. What is the company’s year-end dividends per share (DPS)? $3.03

4. What was the company’s year-end book value per share (BVPS)? 56.63

5. What is the company’s current dividend yield? You could also use the 2016-year end average dividend yield. If you do so, please state?

6. What is the company’s beta coefficient? 0.16

7. What is the company’s earnings price multiples (P/E)? 17.64

8. What is the company’s market to book ratio (M/B)?

Case Study-Part Two

A.      Using the information from Case Study Part one, answer the following questions using Ratio Analysis:

1.            State your company’s Total Assets (TA) Turnover Ratio:

a)            Is your company managing its assets efficiently? What would you recommend your company to do to improve its asset management?

2.            State your company’s debt ratio and Times-Interest-Earned (TIE) Ratio:

a)            Is your company managing its debt issuances efficiently? What would you recommend your company to do to improve its asset and debt management?

3.            State your company’s Return on Total Assets (ROA)?

a)            Is your company having enough ability to turn its assets into net-income?

4.            What is your company’s ROE?

B.     Using the information from Case Study Part one, answer the following questions using market value analysis:

1.           Using yahoo finance, answer the following:

a)            What is the expected price earnings ratio (expected P/E).

b)            How does the current ratio (P/E) indicate compared to the expected P/E ratio?

c)            Is it undervalue based on expected P/E ratio? Please explain.

2.           Using the ROE in the section A, answer the following:

a)            Assuming an investment of 20 years, what is the present value of this stock?

b)            Is the present value higher or lower than the current stock price?

c)            Would you consider this stock be undervalue or overvalued? Please explain.

3.           Answer the following:

a)            What would be the company’s current indicated dividend?

b)            What is the company’s expected Dividend?

c)            What would be the company’s expected dividend yield, using the current price and expected dividend?

d)            What is the Company’s expected growth rate in earnings?

e)            What is the company’s expected growth in dividends?

f)             What is the company’s dividend payout and/or earnings retention rate?

g)            Is this dividend policy sustainable?

4. Using a Discounted Cash Flow (DCF) analysis with the information in part B, section 4, answer the following:

a)            What is the DCF expected ROE?

b)            Is the expected ROE higher or lower than the realized ROE in part A?

c)            What can you conclude about the difference between the expected ROE and the realized ROE in part A?

5.           Assuming a 5% historical risk-free rate of return, and a 10% market return, answering the following?

a)            What is the market expected risk premium?

b)            Using Capital Asset Pricing Model (CAPM), what is the expect company’s risk premium?

c)            How this expected return compares to the other ROE’s?

c.      Using the information from Section A and B, what is your final evaluation and recommendation regarding your company’s stock?

Your company gives everyone who applies to your company a proficiency test. Your boss likes to hire people who fall in the "average" range. They feel that people who score exceptionally high on the test are more likely to leave for a better job, and people who score very low are not productive enough. The average score on the proficiency test is 750 with a variance of 400. Your boss tell you to exclude the top 14% and the bottom 27%of applicants. What range of scores would get an interview?

What is the larger Z? What is the smaller Z? What is μ?   What is σ ? What is the larger X? What is the small X?   What is your conclusion?   

Milden Company is a merchandiser that plans to sell 37,000 units during the next quarter at a selling price of $55 per unit. The company also gathered the following cost estimates for the next quarter:

Required:

1. Prepare a contribution format income statement for the next quarter.

2. Prepare a traditional format income statement for the next quarter.

The following information applies to questions 7 – 9:

A truck that cost $18,000 and on which $16,000 of accumulated depreciation has been recorded was sold on January 1, the first day of the year.

7. Assume the truck was sold for $2,500 cash. The entry to record the sale would include:

8. Assume the truck was sold for $1,500 cash. The entry to record the sale would include:

9. Assume the truck was traded for new equipment valued at $10,000 and that a $2,200 trade-in allowance was given for the old truck. The entry to record the exchange would include:

12. Jones Co. borrows $30,000 from the bank at 9% interest on August 31. Jones' journal entry to record accrued interest on the note on September 30 would include (use a 365-day year):

Suppose a simple monopoly faces the following demand curve for its product: P = 100 - Q. Suppose the monopolist faces total costs given by: TC = 20Q.

a. Draw the demand curve, the marginal revenue curve, and the marginal cost curve. Make sure to label all axes and intercepts.

b. What are the values for the simple monopoly profit-maximizing price and quantity? Label these on the graph.

c. Consider the consumers' surplus that is associated with the monopolist’s optimal price/quantity combination. Label this consumers' surplus on your graph and calculate its value.

d. Suppose the mayor proposes an executive order to regulate the simple monopoly so that it becomes allocatively efficient. How much would be traded under the proposed regulation? What would consumers' surplus be both graphically and numerically under the proposed regulation?

e. Is the simple monopolist’s original unregulated optimal output level allocatively efficient? f. If not, please show graphically and compute numerically a value that reflects the dollar loss to society of the inefficiency under the original unregulated simple monopoly solution.

g. Suppose the government is corrupt and the monopolist realizes he can bribe the mayor to stop him from proposing the regulation. Using all the information given above, what is the maximum amount that the monopolist would offer the mayor to "kill" the regulation idea?

Hawk Homes, Inc., makes one type of birdhouse that it sells for $29.80 each. Its variable cost is $14.30 per house, and its fixed costs total $13,376.50 per year. Hawk currently has the capacity to produce up to 2,900 birdhouses per year, so its relevant range is 0 to 2,900 houses.

Required:
1. Prepare a contribution margin income statement for Hawk assuming it sells 1,180 birdhouses this year. (Enter your answers rounded to 2 decimal places.)

2. Without any calculations, determine Hawk’s total contribution margin if the company breaks even. (Enter your answers rounded to 2 decimal places.)

3. Calculate Hawk’s contribution margin per unit and its contribution margin ratio. (Round your answers to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))

4. Calculate Hawk’s break-even point in number of units and in sales revenue. (Round your "Sales Revenue" answer to 2 decimal places and "Unit" answer to the nearest whole number.)

5. Suppose Hawk wants to earn $29,000 this year. Determine how many birdhouses it must sell to generate this amount of profit. (Round up to the next whole number.)

Via Gelato is a popular neighborhood gelato shop. The company has provided the following data concerning its operations: Fixed Element per Month Variable Element per Liter Actual Total for June Revenue $ 16.00 $ 90,540 Raw materials $ 5.05 $ 31,630 Wages $ 6,000 $ 1.80 $ 16,900 Utilities $ 2,030 $ 0.60 $ 6,000 Rent $ 3,000 $ 3,000 Insurance $ 1,750 $ 1,750 Miscellaneous $ 690 $ 0.75 $ 5,200 While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $6,000 plus $1.80 per liter of gelato sold and the actual wages for June were $16,900. Via Gelato expected to sell 6,000 liters in June, but actually sold 6,200 liters. Required: 1. What is the amount of revenue that would be included in the flexible budget for Via Gelato in June? 2. What is the total amount of fixed expense per month in Via Gelato's flexible budget? 3. What is the variable expense per liter in Via Gelato's flexible budget for all expense lines combined? What is the total variable expense for the month in Via Gelato's flexible budget? 4. What is the Net Operating Income in Via Gelato's flexible budget? 5. What is the Via Gelato's actual Net Operating Income for the month? 6. Using your answers from steps 4 and 5, what is the overall revenue and spending variance (the revenue and spending variance for the Net Income column) for Via Gelato in June? (Input all amounts as positive values. Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)