Part A Supply Ltd entered into a non-cancellable five-year lease arrangement with Customer Ltd on 1 July 2019. The lease is for an item of machinery. There are to be five annual payments of $315 000, the first being made on 30 June 2020. The implicit interest rate is 12%. The Machinery is expected to have an economic life of six years, after which time it will have an expected residual value of $210 000. There is a bargain purchase option that Customer Ltd will be able to exercise at the end of the fifth year for $280 000. Customer Ltd determined that this contract contains a lease.

REQUIRED: Prepare the journal entries in the books of the lessee (Customer Ltd) from 1 July 2019 to 30 June 2020 (the end of the reporting period). Show all working.

Part B Customer Ltd enters into a 10-year contract with Supplier Ltd for the right to use two specified physically distinct dark fibres within a larger cable connecting Hong Kong to Tokyo. Customer Ltd makes the decisions about the use of the fibres by connecting each end of the fibres to its electronic equipment (i.e., Customer ‘light’ the fibres and decides what data and how much data to transfer). If the fibres are damaged, Supplier Ltd is responsible for the repairs and maintenance. Supplier Ltd owns extra fibres but can substitute those for Customer Ltd’s fibres only for reasons of repairs, maintenance or malfunction.

REQUIRED: Determine whether the contract contains a lease. Please explain and justify your conclusion according to AASB 16.

Hot Pockets Corporation is considering going public. Managers want to estimate common stock value. The standard deviation of returns for this firm is 20%. The firm’s beta is 0.8. 3-month T-Bills currently trade at a discount to par of 1% on an annualized basis. The expected return on the stock market is 10%. There are 10,000 shares of common stock outstanding. Assume the firm’s capital structure is 50% debt, 50% common equity, the cost of debt is 6%, and the marginal tax rate for the firm is 21%.

a) What is the total risk of this firm, and what is its systematic risk?

b) What is the expected return of this stock? What is the name of the model you use to estimate it?

c) What is the Weighted Average Cost of Capital for the firm?

d) If the firm’s estimated free cash flows over the next 3 years are:

Year Estimated Free Cash Flow

2018 $100,000

2019 $200,000

2020 $300,000

and after 2020 to infinity, expected free cash flows will grow at a rate of 4% per year: (i) what is the value of its equity outstanding; and (ii) what would be the price per share?

e) (i) If an investor in Hot Pockets owns equal amounts of Hot Pockets, Nextera Energy, Southwest Airlines, and Caterpillar common stock, what will the market risk of his/her portfolio be? (Assume standard deviation of 10%, 30%, and 25%, and beta of .5, 1.5, and 1 for each of Nextera Energy, Southwest Airlines, and Caterpillar common stock.) (ii) Given the above information, what will be the percentage return on this investor’s portfolio if the market goes up 10%?

Hot Pockets Corporation is considering going public. Managers want to estimate common stock value. The standard deviation of returns for this firm is 20%. The firm’s beta is 0.8. 3-month T-Bills currently trade at a discount to par of 1% on an annualized basis. The expected return on the stock market is 10%. There are 10,000 shares of common stock outstanding. Assume the firm’s capital structure is 50% debt, 50% common equity, the cost of debt is 6%, and the marginal tax rate for the firm is 21%.

a) What is the total risk of this firm, and what is its systematic risk?

b) What is the expected return of this stock? What is the name of the model you use to estimate it?

c) What is the Weighted Average Cost of Capital for the firm?

d) If the firm’s estimated free cash flows over the next 3 years are:

Year                       Estimated Free Cash Flow

2018                      $100,000

2019                      $200,000

2020                      $300,000

and after 2020 to infinity, expected free cash flows will grow at a rate of 4% per year: (i) what is the value of its equity outstanding; and (ii) what would be the price per share?

e) (i) If an investor in Hot Pockets owns equal amounts of Hot Pockets, Nextera Energy, Southwest Airlines, and Caterpillar common stock, what will the market risk of his/her portfolio be? (Assume standard deviation of 10%, 30%, and 25%, and beta of .5, 1.5, and 1 for each of Nextera Energy, Southwest Airlines, and Caterpillar common stock.) (ii) Given the above information, what will be the percentage return on this investor’s portfolio if the market goes up 10%?

Question 1 Classify the following statements as goals, objectives, or strategies/tactics. If the statement is part goal or objective and part strategy/tactic, separate the statement into its relevant parts. For statements classified as either a goal or an objective, further classify them as either short-term or long-term (assume it is January 1, 2018) and financial or nonfinancial. In addition, if you feel that a statement is an outcome (i.e., either a goal or an objective), further assume that it is appropriate and realistic as these terms are defined in Chapter 2. After you have classified the statement, explain your reasoning in no more than two sentences. (Instructor’s Note: The fact that a case may refer to a statement as a goal or strategy, for example, is not controlling. Business terminology is often used incorrectly even in business reports.)

A. Maximize stockholder wealth over the long term.

B. Increase the percentage of business-to-consumer package deliveries from 46% of domestic deliveries in 2017 to 51% of domestic deliveries in 2019.

C. Increase revenues from higher-margin aero/defense and transportation aluminum products from 31% to 41% of revenues.

D. Expand into 10 emerging global markets by the end of 2020. E. Increase revenues 20% in market share of all products sold by 20% by the end of 2020.

F. Lower the average price of all products sold by 10% over the next year.

G. Increase market share by 10% over the next five years by adding five new products to the company’s present product line.

During 2020, PC Software Inc. developed a new personal computer database management software package. Total expenditures on the project were $900,000, of which 40% occurred after the technological feasibility of the product had been established. The product was completed and offered for sale on January 1, 2021. During 2021, revenues from sales of the product totaled $1,440,000. The package is expected to be successfully marketable for five years, and the total revenues over the life of the product are estimated to be $6,000,000.

Required

a. Prepare the journal entry to account for the development of this product in 2020.

b. Prepare the journal entry to record the amortization of capitalized computer software development costs in 2021.

c. What disclosures are required in the December 31, 2021, financial statements regarding computer software costs? Enter the missing items from the following note disclosure.

At December 31, 2021, the unamortized software intangible asset totals $Answer
This is equal to $Answer originally capitalized less amortization in 2021 of $Answer
The amount charged to expense as amortization of software intangible asset in 2021 was $Answer

The estimated net realizable value of computer software is greater than the remaining unamortized software intangible asset.

d. Suppose this product were developed for internal use. How would your answers to (a), (b), and (c) change?

The text book: Robert H. Frank, Ben S. Bernanke, Kate Antonovics, Ori Heffetz - Principles Of Economics 7

Answer this question using the concepts discussed in Textbook Ch. 27 and assume that, initially, the economy is in its long run equilibrium.

“The global economy will contract by 3% this year as countries around the world shrink at the fastest pace in decades, the International Monetary Fund says. The IMF described the global decline as the worst since the Great Depression of the 1930s. It said the pandemic had plunged the world into a “crisis like no other” (BBC News 14 April 2020).”

(a) With reference to the news above and with the help of an aggregate demand-supply diagram, briefly explain how the Coronavirus pandemic may reduce equilibrium global output in the short run.

“The plunge (of crude oil price) started after Russia rejected a proposal by OPEC to cut its crude oil production by 1.5 million barrels a day. In apparent retaliation, Saudi Arabia cut prices for buyers over the weekend (nbcnews March 10, 2020)”

(b) With the help of an aggregate demand-supply diagram, briefly explain how a sudden crude oil price plunge may affect equilibrium global output in the short run.

(c) With references to the two pieces of news above and assuming that the prediction of IMF is correct, briefly explain how the Coronavirus pandemic and crude oil price plunge may affect equilibrium inflation rate and global output in the short run and the long run. Please illustrate your answer with aggregate demand-supply diagrams.

Assume that we are now at the beginning of year 2020 and are trying to evaluate Company A using different valuation models. Answer all of questions below.   
1) The current leveraged beta of Company A is estimated to be 2.0 and the marginal tax rate is 40%. The risk-free rate for all the maturity is 3% and the market risk premium is 6.62%. Its debt-to-equity ratio is 1.00 currently. Next year, Company A expects to increase its debt-to-equity ratio to 1.50. Please calculate Company A’s current cost of equity, and estimate its cost of equity after it increases its debt-to-equity ratio.
2) Company A is facing a very competitive market condition and the projected free cash flow to the firm for the next five years are 500 million, 550 million, 600 million, 620 million, 650 million. Then it is expected to grow at a 3% beyond the fifth year. The WACC of the firm is estimated to be 10% and will not change in the future. Please use the “Perpetuity Growth Method” and estimate the firm’s enterprise value at the beginning of the year 2020(now).
3) The following table presents the EV/EBITDA information about Company A’s comparable companies.
Comparable Firm Information
Company Name EV/EBITDA
Company B 8.5 Company C 8.0 Company D 7.8
Besides, we also know that the EBITDA of Company A is 1500 million and its net debt is 6500 million. Its number of fully diluted shares is 100 million. Please estimate the firm’s share price range (+/- 1*standard deviation).

This assignment uses data structures, selection, use, control structures, logic, computation, file I/O, etc. In C++

There should be 3 files for the project: theMain.cpp, dateClass.h, dateClass.cpp (or similar file names)

For input/output. Read at least 10 dates in a data file set up this way:

The first number is the number of data items in the file. Then after that, each row is one date in the format month day year.

here is a sample data file of 6 elements:

6

1 1 2016

12 31 2011

11 01 -5506

13 02 2002

2 31 2020

2 21 2015

the output would be:

1 1 2016 would be: 1/1/16, January 1, 2016 and 1 January 2016

12 31 2011 would be: 12/31/11, December 31, 2011 and 31 December 2011

11 01 -5506 is an unknown date

13 02 2002 is an unknown date

2 31 2020 is an unknown date

2 21 2015 would be: 2/13/15, February 21, 2015 and 13 February 2015

if you program the main program similar to the example below, the output will be close to the example in the textbook. (the example below does not use files or a loop to read data)

#include <iostream>

#include <string>

#include "dateClass.h"

using namespace std;

int main()

{

       Date aDate(3,15,2016);

       aDate.displayShort();

       aDate.displayLong();

       aDate.displayGlbl();

       cout << endl;

       system("pause");

       return 0;

} //end main

(A)

Supply Ltd entered into a non-cancellable five-year lease arrangement with Customer Ltd on 1 July 2019. The lease is for an item of machinery. There are to be five annual payments of $315 000, the first being made on 30 June 2020. The implicit interest rate is 12%. The Machinery is expected to have an economic life of six years, after which time it will have an expected residual value of $210 000. There is a bargain purchase option that Customer Ltd will be able to exercise at the end of the fifth year for $280 000. Customer Ltd determined that this contract contains a lease.

REQUIRED:

Prepare the journal entries in the books of the lessee (Customer Ltd) from 1 July 2019 to 30 June 2020 (the end of the reporting period). Show all working.

(B)

Customer Ltd enters into a 10-year contract with Supplier Ltd for the right to use two specified physically distinct dark fibres within a larger cable connecting Hong Kong to Tokyo. Customer Ltd makes the decisions about the use of the fibres by connecting each end of the fibres to its electronic equipment (i.e., Customer ‘light’ the fibres and decides what data and how much data to transfer). If the fibres are damaged, Supplier Ltd is responsible for the repairs and maintenance. Supplier Ltd owns extra fibres but can substitute those for Customer Ltd’s fibres only for reasons of repairs, maintenance or malfunction.

REQUIRED:

Determine whether the contract contains a lease. Please explain and justify your conclusion according to AASB 16.

The following table shows the balances from various accounts in the adjusted trial balance for UniLink Telecom Corp. as of December 31, 2020:

Required:
1. Assuming that the company’s income tax rate is 30%, what are the tax effects and after-tax measures of the items labelled as pre-tax? (Negative answers should be indicated by a minus sign.)

2. Prepare a multi-step income statement for the year ended December 31, 2020. (Amounts to be deducted should be indicated by a minus sign in the other revenues and expenses section and the discontinued operations section.)