Answer two of the following three Problems

Problem 1

Company:                        XYZ Company

Date of bonds:                January 1, 2019

Term:                               4 years

Face (Par) Value:            $1,000

Stated interest rate:         12%

Effective interest rate:    10%

Interest payment dates on January 1 and July 1

1. Compute the market price of the bonds and journalize the issuance of the bonds.

2. Prepare a schedule to amortize the premium or discount using the effective interest method of amortization for the first year and journalize the entries to record the interest payment on July 1, 2019 and January 1 2020.

3. Interest expense for the year ended December 31, 2019 is $______________.

1. For the first year, the average smart phone was approximately $250, and sales for that year were forecast to be 997.7 million. For the second year the average smart phone was approximately $200, and sales for that year were forecast to be 1401.3 million. A) Assume that the quantity of smart phones sold each year, q (in millions), is the linear function of price per smart phone, p (in US dollars). Write an equation for q as a function of p. B) Explain, in the context of sales, why it is reasonable that the slope of your linear function is negative. C) In the context of smart phone sales, what is the significance of the verticle axis intercept for your linear function?

Boom and Fall (B&F) expects to grow its business in the first 3 years and then the business expects the growth to decline after. The company just paid its annual dividend of $1 per share and is planning to increase its annual dividend by 10% for the next 3 years, and then the dividend will decline at an annual rate of 4% forever.

What is the value of B&F stock in one year if the required return is 12%?

What would be the impact on B&F stock price if the business growth will not decline after 3 years, therefore management would maintain the same dividend as that of year 3? Explain.

Boom and Fall (B&F) expects to grow its business in the first 3 years and then the business expects the growth to decline after. The company just paid its annual dividend of $1 per share and is planning to increase its annual dividend by 10% for the next 3 years, and then the dividend will decline at an annual rate of 4% forever.

What is the value of B&F stock in one year if the required return is 12%? What would be the impact on B&F stock price if the business growth will not decline after 3 years, therefore management would maintain the same dividend as that of year 3? Explain.

Your company uses a standard costing system, which bases its quantitative standards on historical experience. You are fortunate to be surrounded by a team of knowledgeable personnel in operations. In your first week on the job, you are asked to do the following tasks.

Q) You believe that your company should not develop its quantitative standards on historical experience. Explain why and suggest an alternative.

Q) Choose one of your company’s products. Suggest one ideal standard, and one currently attainable standard. Ensure that you include price, usage and cost in each standard.

note: for question two take any company's product as an example.

A stock's dividend in 1 year is expected to be $2.4. The dividend is expected to remain the same indefinitely. The stock's required return is 12%. The estimated value of the stock today is $________.

A stock will pay no dividends for the next 3 years. Four years from now, the stock is expected to pay its first dividend in the amount of $2.4. It is expected to pay a dividend of $3 exactly five years from now. The dividend is expected to grow at a rate of 7% per year forever after that point. The required return on the stock is 12%. The stock's estimated price per share exactly TWO years from now, P₂ , should be $______.

Data for two machines is as shown below:

Which of the following statements is TRUE if the price of Machine X is estimated to remain the same over the foreseeable future?

On March 31, 2018, Brodie Corporation acquired bonds with a par value of $300,000 for $313,650. The bonds are due December 31, 2023, carry a 9% annual interest rate, pay interest on June 30 and December 31, and are being held to maturity. The accrued interest is included in the acquisition price of the bonds. Brodie uses straight-line amortization.

Required:

The Morgan corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 15 years. The bond makes no payments for the first 5 years, then pays $600 every six months over the subsequent six years, and finally pays $1,000 every six months over the last four years. Bond N also has a face value of $20,000 and a maturity of 15 years, it makes no coupon payments over the life of the bond. If the required return on both of these bonds is 10 percent compounded annually, what is the current price of bond M? Of Bond N?