Consider the following information which relates to dividends per share (DPS) for a given company:

Today, we are in 2020. Management is in the process of deciding whether to expand or not to expand the firm’s branches. Below, is a set of inputs associated with each scenario:

Scenario #1 – Do Not Expand: Dividend by the end of 2020 is expected to grow at the historical annual growth rate for the period 2015−2019, which is currently undetermined. This period adds up to four years based upon starting at time zero. Once determined, this rate is expected to continue in the future. Under this scenario, the required return on common stock is 14.32%.

Scenario #2 – Expand: Dividend in 2021 is expected to be $2.19 per share, which will grow at an annual rate of 13.19% for two years (2022 and 2023), and then, the divided would grow at the same unknown rate in the first scenario from 2024 thereafter. Under this scenario, the required return on common stock is 17.07%.

Required: What is the dollar difference in the present value per share of common stock between both scenarios?

$Answer

INPUT YOUR ANSWER AS AN ABSOLUTE VALUE ROUNDED TO 2 DECIMAL PLACES. DO NOT USE POSITIVE/NEGATIVE SIGNS. DO NOT ROUND INTERMEDIATE CALCULATIONS.

You are currently employed as partner in United & Party LLC, an accounting firm. The following three different audits were performed by your team for the year ended December 31, 2018:

Peoples Shelter, a non-profit organization. Except for salaries and allowances, the company has not kept vouchers or receipts for more than 60 per cent of its expenses.

Jack Holdings, Inc. Jack Holdings is a major construction company. Jack Holdings also purchases large vacant blocks of land that it later subdivides for the construction of houses and units to compensate for the irregularity of its contracted building projects. These are then sold on its own account. Your evidence strongly shows that the apportionment of costs to houses and units sold has been kept low in order to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree and maintain that the stock of properties is correctly valued.

Vacation Dreamland Ltd. Vacation Dreamland booked a major German group to perform in selected cities in the U.S.A. The contract required that Vacation Dreamland should pay the group in US dollars but, to reduce costs, it did not hedge the amounts. Subsequent to year end, the German Mark fell against the US dollar and a substantial loss relating to the group’s tour was expected. The management of Vacation Dreamland tried unsuccessfully to renegotiate the band’s contract and was not able to obtain finance to cover the expected shortfall. Vacation Dreamland cancelled the tour and expects a substantial claim from the German group. Your analysis indicate that Vacation Dreamland does not have the income, cash or other assets to sustain such a loss.

Required:

Assuming that all amounts involved are material, identify:

The most likely auditor’s opinion that you would issue on each financial report for the year ending December 31, 2018 and

Discuss the justifications for each of the opinions.

1. Draw an exposure diagram to illustrate a firm’s exposure to interest rate risk if the firm is going to borrow $10m six months from today. Assume the loan will be a one-year loan with all interest paid at the end of the year. Graph the relation between the firms interest costs and interest rates. Also graph the relation between the firm’s profit and interest rates (assuming that higher interest costs cannot be passed on the consumers).

2.Draw an exposure diagram to illustrate the relationship between a firm’s costs and the exchange rate between US dollar and Euro dollar if the fir plans to purchase goods from an European firm one year from today. Assume that the transaction is denominated in Euro dollar, but that the firm is concerned about its costs in US dollars. Also draw an exposure diagram to illustrate the relationship between a firm’s profit and the exchange rate between US dollar and Euro dollar.

3. Draw an exposure diagram to illustrate the relationship between a gold mining firm’s profit and the price of gold in three months.

4. Would a call option or a put option hedge the exposure of the firms described in problem 1,2 and 3?

5. Would a long (buy) or a short (sell) forward position hedge the exposure of the firms described in problem 1,2 and 3?

On December 31, 2020, Pina Colada Corp. estimated that 4% of its net accounts receivable of $455,200 will become uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. The allowance account had a zero balance before adjustment on December 31, 2020. On May 11, 2021, Pina Colada Corp. determined that the Jeff Shoemaker account was uncollectible and wrote off $2,276. On June 12, 2021, Shoemaker paid the amount previously written off.

Prepare the journal entries on December 31, 2020, May 11, 2021, and June 12, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Noelle Inc. issued a $1.3 million bond at 9% for 3 years to finance a project. The bonds were issued on January 1, 2018. The bond pays interest semi annually on July 1 and January 1. The market rate is 8%. The company used effective interest method. Year end is September 30. Required: a) Calculate the proceeds (price) that Noelle Inc. would receive for the bond on January 1, 2018. The PV tables can be used. Show calculations b) Prepare a bond amortization schedule using the effective interest method. c) Prepare the journal entries to record the initial sale of the bond on January 1, 2018, the interest payment on July 1, 2018, the accrual on September 30, 2018 and the interest payment on January 1, 2019. d) Assume that on May 1, 2020, Noelle Inc. decides to retire 30% of the bonds for a cash price of 102 plus accrued interest. 1. Prepare the journal entry to pay out the interest to the bondholders on May 1, 2020 due to the bond retirement 2. Prepare the journal entry for the bond retirement on May 1, 2020

Blossom Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $6,000,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2020, new technology was introduced that would accelerate the obsolescence of Blossom's equipment. Blossom's controller estimates that expected future net cash flows on the equipment will be $3,750,000 and that the fair value of the equipment is $3,300,000. Blossom intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Blossom uses straight-line depreciation.

(a) What is the carrying value of the equipment at December 31, 2020?

(b) Prepare the journal entry (if any) to record the impairment at December 31, 2020.

(c) Prepare any journal entries for the equipment at December 31, 2021. The fair value of the equipment at December 31, 2021, is estimated to be $3,450,000.

(d) Repeat the requirements for (a) and (b), assuming that Blossom intends to dispose of the equipment and that it has not been disposed of as of December 31, 2021.

*I keep getting these sorts of problems wrong on my practice quiz so if you could break down how you're finding the solution I would greatly appreciate it!

Brady Construction Company contracted to build an apartment complex for a price of $5,200,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars.