1. Which of the following statements about bonds and their prices is correct:

1. There is an inverse relationship between interest rates and price.  
2. When the coupon rate of the bond is greater than the required, market interest rate, the price of the bond is greater than the face value of the bond.
3. The bond with a greater term to maturity is affected to a greater extent by the change in the interest rate
4. All of the above
5. A) and B) only

2. Which of the following constitutes a difference between debt and equity?

1. The right to claim against the assets of the corporation in the case of bankruptcy
2. The entity issuing the security
3. The nature of accounting revenue underlying the security
4. Both B) and C)
5. None of the above

3. Which of the following describes the difference between the returns on debt and equity?

1. The return on debt is more variable than the return on equity
2. The return on debt is stipulated in the debt contract, whereas the return on equity is stipulated in the trust deed
3. The return on debt is stipulated in the trust deed, whereas the return on equity is varied at the discretion of management
4. The return on debt is not secure
5. None of the above

4. What is the Price of a Bond that pays a coupon interest rate of 13.5% p.a. with interest paid semi-annually, has four years to maturity and which has a Face value of $100. Market interest rates are 13.5% (Round to the nearest dollar).

1. $110
2. $100  
3. $105
4. $98
5. None of the above

5. The intrinsic value of an asset is:  

1. The asset’s minimum value.

B) The asking price for the asset.        

C) The asset’s replacement value.    

                        D) The assets’ future cash flows compounded by the required rate of return.   

E) None of the above

6. What is the Present Value of an asset that pays cash flows of $1.5 million per year for three (3) years if the cash flows commence in Year Three? The required rate of return is 10% p.a.

1. $3.08 million
2. $4.25 million  
3. $5.06 million
4. $3.73 million  
5. None of the above

7. The prospective P/E ratio:  

1. Is positively related to the payout ratio
2. Negatively related to the cost of equity
3. Positively related to the past dividend
4. All of the above
5. A) and B) only

8. What is the future value of a $2,000 invested for 15 years at an interest rate of 10% p.a. compounded quarterly? (Rounded to the nearest dollar).

1. $5,000
2. $7,600
3. $8,800
4. $6,180
5. None of the above

9. The value of a share is given by the present value of which cash flows?

1. The last dividend and future dividends
2. The most recent dividend and future dividends
3. The current dividend and future dividends
4. Future dividends only
5. None of the above

10. The interest rate is defined as:

1. The opportunity cost of selling real assets  
2. The cost of having money in the bank.
3. The cost of liquidity.  
4. The opportunity cost of buying real assets
5. None of the above

** Please show the all mathematical steps and the Financial Calculator step if possible, Thanks.

First International Bank ​(FIB​) is examining the profitability of its Premier​ Account, a combined savings and checking account.

FIB recently conducted an​ activity-based costing study of its services. It assessed the following costs for six individual services. The use of these services in 2017 by three customers is as​ follows:

Assume Robinson and Butler always maintain a balance above​ $1,000, whereas Slaton always has a balance below​ $1,000.

Account Usage Activity-Based Cost per "Transaction"   Robinson   Slaton Butler

Deposit/withdrawal with teller $2.40 42 54 6

Deposit/withdrawal with automatic teller machine (ATM) 0.80 12 24 17

Deposit/withdrawal on prearranged monthly basis 0.40 0 14 58

Bank checks written 8.40 8 4 1

Foreign currency drafts 12.20 3 2 5

Inquiries about account balance 1.20 9 19 8

Average Premier Account balance for 2017 $1,325 $800 $25,500

Depositors receive a​ 2% annual interest rate on their average deposit. FIB earns an interest rate spread of 3​% ​(the difference between the rate at which it lends money and the rate it pays​ depositors) by lending money for​ home-loan purposes at​ 5%. Thus, FIB would gain​ $60 on the interest spread if a depositor had an average Premier Account balance of​ $2,000 in 2017 ​($2,000 x 3​% ​= $60). The Premier Account allows depositors unlimited use of services such as​ deposits, withdrawals, checking​ accounts, and foreign currency drafts. Depositors with Premier Account balances of​ $1,000 or more receive unlimited free use of services. Depositors with minimum balances of less than​ $1,000 pay a $20​-a-month service fee for their Premier Account.

Prepare THREE financial statements as described in the requirements below.

Kathy Wintz formed a lawn service business as a summer job. To start the business on May 1, 2018, she deposited $1,000 in a new bank account in the name of the business. The $1,000 consisted of a $600 loan from Bank One to her company, Wintz Lawn Service, and $400 of her own money. The company issued $400 of capital to Wintz. Wintz rented lawn equipment, purchased supplies, and hired other students to mow and trim customers’ lawns. At the end of each month, Wintz mailed bills to the customers. On August 31, she was ready to dissolve the business and return to college. Because she was so busy, she kept few records other than the checkbook and a list of receivables from customers. At August 31, the business’s checkbook shows a balance of $2,000, and customers still owe $750. During the summer, the business collected $5,500 from customers. The business checkbook lists payments for supplies totaling $400, and it still has gasoline, weed trimmer cord, and other supplies that cost a total of $50. The business paid employees $1,800 and still owes them $300 for the final week of the summer. Wintz rented some equipment from Ludwig’s Machine Shop. On May 1, the business signed a six-month rental agreement on mowers and paid $600 for the full rental period in advance. Ludwig’s will refund the unused portion of the prepayment if the equipment is returned in good shape. In order to get the refund, Wintz has kept the mowers in excellent condition. In fact, the business had to pay $300 to repair a mower. To transport employees and equipment to jobs, Wintz used a trailer that the business bought for $300. The business estimates that the summer’s work used up one-third of the trailer’s service potential. The business checkbook lists a payment of $500 for cash withdrawals paid during the summer. The business paid the loan back during August. (For simplicity, ignore any interest expense associated with the loan.)

Requirements

1. Prepare the income statement and the statement of owner’s equity of Wintz Lawn Service for the four months May 1 through August 31, 2018.

2. Prepare the classified balance sheet (report form) of Wintz Lawn Service at August 31, 2018.

3. Was Wintz’s summer work successful? Give your reason for your answer.

Bill’s Bootstrap is analyzing whether to go ahead with a project to set up a pop-up store at the Calgary Stampede, which would be operational for the next three years.

Question 19

Part A.

The mini building would cost the company $600,000 today and would be sold at the end of the three years for $0 and have no tax consequences thereafter. With a CCA rate of d = 25%, what are the CCA deductions for the three years of operations?  

Question 20

The Gross Profit of this project will be $370,000 next year and this will grow at a rate of 3% per year for the following two years. They expect 30% of the gross profit in any year will come from customers who would have travelled to purchase their items at the old store, indicating cannibalization. The space for the mini building could be rented out for $100,000 per year, if this project is not taken on. The interest expense for the debt that Bill’s Bootstrap has to take on is $1,500 per year and the tax rate is 30%. What is the Unlevered Net Income for each year of operation?

Part C.Question 21

The net working capital is $9,000 in years 1 and 2 and will be recovered at the end of year 3. The interest rate is 8%. What is the NPV of this project?

Area Rugs​,​Inc., is considering three possible countries for the sole manufacturing site of its newest area​ rug: Spain​, Singapore, and the United States. All area rugs are to be sold to retail outlets in the United States for $280 per unit. These retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit​ (area rug) differ in the three countries

Requirement 1

Compute the breakeven point for Area Rugs, Inc. in each country in (a) units sold and (b) revenues

Determine the formulas for the breakeven point in units and the breakeven point in revenues. begin with the breakeven point in units, then the breakeven point in revenues.  

Requirement 2

If Area Rugs, Inc. plans to produce and sell 65,000 rugs in 2014, what is the budgeted operating income for each of the three manufacturing locations? comment on the results

The following data gives the creatinine clearance Y (in $1000’s) of a sample of 33 male subjects along with their creatinine concentration (X1), age (X2) and the weight (X3). The data are:

1. Plot a scatter plot of Y against each predictor variable. What do the plots tell you about the nature of the relationship between y and each of the independent variables?
2. Obtain the correlation matrix of the X variables. Does the matrix indicate potential problems with multicollinearity?
3. Fit a regression model containing the independent variables as first order terms.
4. Obtain variance inflation factors for the model in (. Is multicollinearity a problem? Explain
5. Obtain residual plots as well as partial residual plots. Do these plots indicate that the regression model should be modified?
6. Theoretical considerations .suggest the model

E(ln(Y)) = b₀+ b₁ln(X₁)+ b₂ln(140-X₂)+b₃ln(X₃).

Fit the theoretical model and examine all the relevant model diagnostics. Do any of the problems encountered with the model in (d) (if there were any problem encountered) seem to have been resolved?

Question: Facts: Bill, a contractor in Brentwood, New York, prepared a bid for construction of an office bu... Facts: Bill, a contractor in Brentwood, New York, prepared a bid for construction of an office building for Fred. In preparation of his bid, Bill asked Sam, a tile manufacturer in Setauket, New York, for a quote on tile to Bill's specifications. On October 27, 2006, Sam returned a statement on his letterhead with a quote of $8,000.00 which stated that the quote was irrevocable. Although Bill did not tell Sam, Bill submitted a bid for the building on November 11, 2006, using Sam's quote as the basis for part of his bid. On January 8, 2007, after the price of tile had increased, Sam told Bill that he was revoking his offer. On January 9, 2007, Bill was awarded the contract to build the office building. Bill demanded that Sam deliver tile as per Sam's offer, but Sam refused. Bill thereupon purchased tile to his specifications from Ted, another tile manufacturer, for $9,000.00. Bill also needed doors for the office building. He contacted Steve, a door manufacturer in Syosset, New York, and placed an order for doors at a cost of $6,000.00, F.O.B. Syosset. Steve entered into a contract, which was reasonable, with a common carrier for the transportation of the doors from Syosset to Brentwood. While the doors were en route, the truck in which the doors were being transported was struck by lightning. The doors were completely destroyed. Bill refused Steve's demand for payment. Steve refused to supply Bill with replacement doors. Bill obtained replacement doors from Tom, another door manufacturer, for a cost of $7,000.00 which was then the current market value for doors meeting Bill's specifications. Bill and Susan, a window manufacturer in Stony Brook, New York, entered into a written contract whereby Susan agreed to provide windows to Bill's specifications no later than October 23, 2007, for a cost of $12,000.00. Susan's profit on the sale to Bill was $2,000.00. Susan has thousands of windows in stock, and can supply anyone with as many windows as he or she needs, at any time. On October 15, 2007, Susan delivered windows to Bill; however, the windows did not conform to Bill's specifications. Bill refused the windows and notified Susan in writing that day that he refused the windows. On October 16, 2007, Susan notified Bill that she would cure the non-conforming tender of goods. On October 18, 2007, Susan delivered new windows to Bill which conformed to Bill's specifications, but Bill had already purchased the windows he needed from Tina, another window supplier, for $11,500.00, on October 17, 2007, and Bill refused to accept Susan's second delivery of windows. Susan sold the windows to Frank, another buyer, for $12,000.00. Bill seeks damages from Sam, Steve and Susan. Steve and Susan seek damages from Bill.

Steve was discharged by impossibility when the doors were destroyed by lightning during transportation to Bill. True or False?

Bill is entitled to receive the full contract price of $6,000.00 from Steve. True or False?

Susan delivered defective windows to Bill on October 15, 2007. True or False ?

Susan is a lost volume seller since she had thousands of windows in stock and could supply anyone with as many windows as they need, at any time. True or False?

Susan is entitled to recover the full contract price of $12,000.00 from Bill. True or False?

Question: Facts: Bill, a contractor in Brentwood, New York, prepared a bid for construction of an office bu... Facts: Bill, a contractor in Brentwood, New York, prepared a bid for construction of an office building for Fred. In preparation of his bid, Bill asked Sam, a tile manufacturer in Setauket, New York, for a quote on tile to Bill's specifications. On October 27, 2006, Sam returned a statement on his letterhead with a quote of $8,000.00 which stated that the quote was irrevocable. Although Bill did not tell Sam, Bill submitted a bid for the building on November 11, 2006, using Sam's quote as the basis for part of his bid. On January 8, 2007, after the price of tile had increased, Sam told Bill that he was revoking his offer. On January 9, 2007, Bill was awarded the contract to build the office building. Bill demanded that Sam deliver tile as per Sam's offer, but Sam refused. Bill thereupon purchased tile to his specifications from Ted, another tile manufacturer, for $9,000.00. Bill also needed doors for the office building. He contacted Steve, a door manufacturer in Syosset, New York, and placed an order for doors at a cost of $6,000.00, F.O.B. Syosset. Steve entered into a contract, which was reasonable, with a common carrier for the transportation of the doors from Syosset to Brentwood. While the doors were en route, the truck in which the doors were being transported was struck by lightning. The doors were completely destroyed. Bill refused Steve's demand for payment. Steve refused to supply Bill with replacement doors. Bill obtained replacement doors from Tom, another door manufacturer, for a cost of $7,000.00 which was then the current market value for doors meeting Bill's specifications. Bill and Susan, a window manufacturer in Stony Brook, New York, entered into a written contract whereby Susan agreed to provide windows to Bill's specifications no later than October 23, 2007, for a cost of $12,000.00. Susan's profit on the sale to Bill was $2,000.00. Susan has thousands of windows in stock, and can supply anyone with as many windows as he or she needs, at any time. On October 15, 2007, Susan delivered windows to Bill; however, the windows did not conform to Bill's specifications. Bill refused the windows and notified Susan in writing that day that he refused the windows. On October 16, 2007, Susan notified Bill that she would cure the non-conforming tender of goods. On October 18, 2007, Susan delivered new windows to Bill which conformed to Bill's specifications, but Bill had already purchased the windows he needed from Tina, another window supplier, for $11,500.00, on October 17, 2007, and Bill refused to accept Susan's second delivery of windows. Susan sold the windows to Frank, another buyer, for $12,000.00. Bill seeks damages from Sam, Steve and Susan. Steve and Susan seek damages from Bill.

Steve was discharged by impossibility when the doors were destroyed by lightning during transportation to Bill. True or False?

Bill is entitled to receive the full contract price of $6,000.00 from Steve. True or False?

Susan delivered defective windows to Bill on October 15, 2007. True or False ?

Susan is a lost volume seller since she had thousands of windows in stock and could supply anyone with as many windows as they need, at any time. True or False?

Susan is entitled to recover the full contract price of $12,000.00 from Bill. True or False?

FACTS In the spring of 2001, Kitsmiller purchased a house in Van Zandt County to use as rental property. In mid-June, he hired B & H Shaw Company, Inc. (B & H) to install a replacement septic tank in the back yard. The septic tank was located about two or three feet from a concrete stoop at the back door of the garage. B & H mounded dirt over the septic tank and the lateral lines going out from it upon completion. Sometime after B & H installed the septic tank, Kitsmiller smoothed out the mounds of dirt over the septic tank and lateral lines. Kitsmiller then leased the property to Moore and his wife on July 27. Kitsmiller testified that he viewed the back yard about a week or ten days prior to leasing the property to the Moores and stated that the dirt around the septic system looked firm.
On August 7, the Moores moved in. On August 11, Moore and his wife went into the back yard for the first time, and as he stepped off the stoop, he was unable to see the ground and could only see his wife and the bag of trash in his left arm. His wife testified that the ground looked flat. Moore testified that he had only taken a few steps off the stoop when his left leg sank into a hole, causing him to fall forward into his wife. As he tried to steady himself with his right foot, it hung and then sank, causing him to fall backward on his head and back. Moore testified that the injury to his back required surgery and affected his ability to earn a living.
Moore filed suit against Kitsmiller and B & H. He sought dam- ages for past and future pain and suffering, past and future mental anguish, past and future physical impairment, and past and future loss of earning capacity. In their answers to Moore’s suit, both Kitsmiller and B & H pleaded the affirmative defense of contribu- tory negligence.
During the jury trial, Moore testified Kitsmiller should have notified him where the septic tank and lateral lines were located
and that the dirt should have remained mounded over the tank and lines. Martin, an on-site septic tank complaint investigator for both the Texas Commission on Environmental Quality and Van Zandt County, testified that dirt should have been mounded over the sep- tic tank and lateral lines, so that when the dirt settled, there would be no holes in the ground around the septic tank or lateral lines.
The jury determined that (1) both Kitsmiller and Moore were negligent, but B & H was not; (2) Kitsmiller was 51 percent negli- gent and Moore was 49 percent negligent; and (3) Moore was entitled to $210,000 in damages. On September 29, 2004, the trial court entered a judgment in favor of Moore and against Kitsmiller in the amount of $210,000 plus interest and costs. Applying com- parative negligence, the trial court entered a modified final judg- ment on November 1, 2004, awarding Moore $107,100 plus interest and costs based upon Moore’s contributory negligence. Moore appealed all issues involving his contributory negligence.
DECISION The judgment of the trial court is affirmed.
OPINION Contributory negligence contemplates an injured per- son’s failure to use ordinary care regarding his or her own safety. This affirmative defense requires proof that the plaintiff was negli- gent and that the plaintiff’s negligence proximately caused his or her injuries. Negligence requires proof of proximate cause. Proxi- mate cause requires proof of both cause in fact and foreseeability. The test for cause in fact is whether the negligent act or omission was a substantial factor in bringing about an injury without which the harm would not have occurred. Foreseeability requires that a person of ordinary intelligence should have anticipated the danger created by a negligent act or omission.
Because comparative responsibility involves measuring the party’s comparative fault in causing the plaintiff’s injuries, it
requires a preliminary finding that the plaintiff was in fact con- tributorily negligent. The standards and tests for determining contributory negligence ordinarily are the same as those for deter- mining negligence. The burden of proof on the whole case is on the plaintiff. However, the burden of proof is on the defendant to prove the defense contributory negligence by a preponderance of the evidence.
The trier of fact may draw reasonable and logical inferences from the evidence. It is within the province of the jury to draw one reasonable inference from the evidence although another inference could have been made.
Moore testified that when he stepped off the stoop into the back yard for the first time on August 11, 2001, he could only see his wife and the plastic bag of trash he was carrying in his left hand. The jury was allowed to draw an inference from this evi- dence that Moore was not watching where he was walking. An individual must keep a proper lookout where he is walking, and a jury is allowed to make a reasonable inference that failure to do so
was the proximate cause of his injuries. It was reasonable for the jury to make an inference from Moore’s testimony that his failure to keep a proper lookout where he was walking contributed to the occurrence.
Moore contends that the only reasonable inference the jury could have made was that, even if he had been watching where he was walking, he would not have been able to avoid stepping in the holes because they were not visible to the naked eye. The jury could have made that inference, but chose not to do so. Thus the jury made a reasonable inference from the evidence in finding Moore contributorily negligent.
INTERPRETATION In cases in which both the plaintiff and defendant are negligent, under comparative negligence the law apportions damages between the parties in proportion to the degree of fault or negligence found against them.

If a plaintiff meets all of the requirements for a negligence claim, it does not necessarily mean that the plaintiff will automatically win their lawsuit. There are certain defenses available to the defendant. Some of those defenses are: (1) contributory negligence; (2) pure comparative negligence; and (3) modified comparative negligence (explained on pages 152-54 of Text). These three defenses were created to protect the defendant when the plaintiff may have been negligent in some way. Please note that in states that follow only "contributory negligence" it means that the plaintiff receives nothing if he/she is found even 1% negligent in the lawsuit (page 152).

First, please discuss whether you agree or disagree with having these three types of defenses in a negligence lawsuit.

Next, assume for the purposes of this question that you do agree with having these three defenses, which of these three defenses do you believe is the most equitable to both the plaintiff and the defendant?

Lastly, do you agree with the appellate court's decision affirming the lower court in Moore v. Kitsmiller (p. 153-54) finding that the plaintiff was 49% negligent? Why or why not? Please note that this case was a comparative negligence case as the plaintiff's overall recovery was reduced from $210,000 to $107,100.

Please separate out and fully explain all of your answers.  In your third answer, you should be discussing the specifics of the case in reaching your conclusion.