The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $70,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,800 every six months over the subsequent eight years, and finally pays $3,100 every six months over the last six years. Bond N also has a face value of $70,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 10% compounded semiannually, what is the current price of bond M and bond N?

The Indica Company Indica originally established in 1962 to make toys is now a leading producer of curios and toys. In 1990 the company introduced ‘high flite’ its first line of high-performance balls. The Indica management has sought opportunities in whatever businesses seem to have some potential for cashflow. In 1999 Mahesh, VP of the Indica identified another segment of the sports ball market that looked promising but highly competitive and served by larger manufacturers. The market was for brightly colored radiant balls and he believed a large number of young people valued appearance and style above performance. He also believed that it would be difficult for competitors to take advantage of the opportunity because of Indica’s cost advantages and ability to use its highly developed marketing skills. As a result in late 1999 Indica decided to evaluate the marketing potential of the radiant colored balls. Indica engaged a leading consulting firm to assess the market for the balls. The report of the consulting firm revealed that the market for the brightly colored balls was very good, less competitive and supported the conclusion that the product could achieve a 10 to 15 percent share of the toys market. The cost incurred by Indica towards the consulting fee and other related expenses were Rs. 150,000. Further the consultants indicated that due to this launch Indica’s current sales will be hit by around 10% amounting to Rs 50,000 on a cashflow basis. The Indica is now considering investing in a machine to produce bright colored balls. The balls will be produced in a building owned by the firm. The building is currently vacant and housing the project saves it Rs 10,000 monthly rent. The original purchase price of the property less depreciation is zero. Working with his staff, Mahesh is preparing an analysis of the proposed new product. He summarizes his assumptions in the following table: Cost of Machinery and equipment Rs. 1000,000 Life of the project 5 Estimated market value of the machinery Rs. 150,000 Expected sales (no.s) during the life of the project Year 1 7000 Year 2 10000 Year 3 14000 Year 4 12000 Year 5 8000 The price of the ball in the first year will be Rs. 102 each. The market is competitive so Mahesh believes that the price will increase at only 5% per year. Conversely the raw materials used to produce the colored ball are rapidly growing at 10% per year. Production cost in the first year will be Rs. 50. The management of Indica believes that the investment in the different items of working capital will be Rs. 15,000 and the company is in the 35% tax bracket. Is this project worthwhile at 20% required rate of return?

Eagle Company makes the MusicFinder, a sophisticated satellite radio. Eagle has experienced a steady growth in sales for the past five years. However, Ms. Luray, Eagle's CEO, believes that to maintain the company's present growth will require an aggressive advertising campaign next year. To prepare for the campaign, the company's accountant, Mr. Bednarik, has prepared and presented to Ms. Luray the following data for the current year, year 1: Variable costs: Direct labor (per unit) $ 100 Direct materials (per unit) 37 Variable overhead (per unit) 19 Total variable costs (per unit) $ 156 Fixed costs (annual): Manufacturing $ 388,000 Selling 286,000 Administrative 792,000 Total fixed costs (annual) $ 1,466,000 Selling price (per unit) 403 Expected sales revenues, year 1 (27,000 units) $ 10,881,000 Eagle has an income tax rate of 30 percent. Ms. Luray has set the sales target for year 2 at a level of $12,090,000 (or 30,000 radios). Required: a. What is the projected after-tax operating profit for year 1? b. What is the break-even point in units for year 1? (Round up your answer to the nearest whole number.) c. Ms. Luray believes that to attain the sales target (30,000 radios) will require additional selling expenses of $294,000 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $294,000? d. What will be the break-even point in sales dollars for year 2 if the firm spends the additional $294,000 for advertising? (Solve by computing volume in units first. Round up units to the nearest whole number and round your final answer to the nearest whole dollar amount.) e. If the firm spends the additional $294,000 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after-tax operating profit? (Solve by computing volume in units first. Round up units to the nearest whole number and round your final answer to the nearest whole dollar amount.) f. At a sales level of 30,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax operating profit of $758,000? (Round intermediate calculations and final answer to the nearest whole dollar amount.)

Evelyn Walton started Walton Manufacturing Company to make a universal television remote control device that she had invented. The company’s labor force consisted of part-time employees. The following accounting events affected Walton Manufacturing Company during its first year of operation. (Assume that all transactions are cash transactions unless otherwise stated.)

Transactions for January 2018, First Month of Operation

1. Issued common stock for $10,000.

2. Purchased $410 of direct raw materials and $60 of production supplies.

3. Used $385 of direct raw materials.

4. Used 70 direct labor hours; production workers were paid $9.70 per hour.

5. Expected total overhead costs for the year to be $3,000, and direct labor hours used during the year to be 1,000. Calculate an overhead rate and apply the appropriate amount of overhead costs to Work in Process Inventory.

6. Paid $144 for salaries to administrative and sales staff.

7. Paid $22 for indirect manufacturing labor.

8. Paid $215 for rent and utilities on the manufacturing facilities.

9. Started and completed 100 remote controls during the month; all costs were transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

10. Sold 80 remote controls at a price of $21.4 each.

Transactions for Remainder of 2018

11. Acquired an additional $18,000 by issuing common stock.

12. Purchased $3,910 of direct raw materials and $880 of production supplies.

13. Used $3,000 of direct raw materials.

14. Paid production workers $9.70 per hour for 900 hours of work.

15. Applied the appropriate overhead cost to Work in Process Inventory.

16. Paid $1,559 for salaries of administrative and sales staff.

17. Paid $236 of indirect manufacturing labor cost.

18. Paid $2,390 for rental and utility costs on the manufacturing facilities.

19. Transferred 850 additional remote controls that cost $12.74 each from the Work in Process Inventory account to the Finished Goods Inventory account.

20. Determined that $166 of production supplies was on hand at the end of the accounting period.

21. Sold 840 remote controls for $21.40 each.

22. Determine whether the overhead is over- or underapplied. Close the Manufacturing Overhead account to the Cost of Goods Sold account.

23. Close the revenue and expense accounts.

Required

1. For each of the above transactions, post the effects to the appropriate T-accounts.

2. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2018.

2. As long as the interest rate is greater than zero, the present value of a single sum will always:

Select one:

a. Equal the future value if the time period is one year.

b. Increase as the interest rate increases.

c. Be more than the future value.

d. Increase as the number of periods decreases.

e. Decrease as the number of periods increases.

3.

A project costs $525 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

Select one:

a. 5.67 years

b. 6.00 years

c. The project never pays back

d. 5.33 years

e. 5.00 years

3.

Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.6. What is your portfolio standard deviation?

Select one:

a. 10.2%

b. 9.8%

c. 6.8%

d. 10.9%

e. 11.2%

4.

A project which has a discounted payback period equal to its life also has a positive NPV.

Select one:

True

False

5.

A firm's stock has a required return of 10%. The stock's dividend yield is 2.5%. What is the dividend the firm is expected to pay over a one year period if the current stock price is $80?

Select one:

a. $2.40

b. $2.80

c. $3.60

d. $2.00

e. $3.20

6.

The party to a leasing arrangement that is entitled to a business expense based upon its use of an asset is called the:

Select one:

a. Lessor.

b. Transferor.

c. Financee.

d. Lessee.

e. Manufacturer.