It is January 2nd and senior management of Baldwin meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 75,000 shares of stock plus a new bond issue. Assume the stock can be issued at yesterday’s stock price ($29.72) and leverage changes to 2.8. Which of the following statements are true? Select all that apply.

Select: 3

Working capital will remain the same at $15,582,128

Equity will be $78,780,432 Total liabilities will be $118,934,248

Total Assets will rise to $214,344,009

Baldwin will issue stock totaling $2,229,000

The total investment for Baldwin will be $199,943,680

How have the needs for life insurance changed with the increasing number of two-income households? Remarried households? What are the implications for these changes when considering the need for income replacement and funds to replace household services? (Participation in this part of the discussion question is required.)

Please share scenarios from friends or relatives describing the financial impact of death when the household had either adequate or inadequate life insurance coverage. What were the implications for the financial situation or lifestyle? (Participation in this part of the discussion question is voluntary because some students may not have an example to relate.)

Which of the following statements regarding cash flow is correct?

Multiple Choice

• In evaluating capital budgeting decisions, cash flows should be valued on a pre-tax basis for consistency's sake.

• Incremental cash flows should include opportunity costs but ignore sunk costs.

• Cash flow should be recognized only when it has accrued according to GAAP practices.

• Cash flow measures changes in the firm's cash account.

• After-tax cash flow is usually identical to accounting profits when accrual accounting is used for financial statement purposes.

Due to the threat from the COVID-19 pandemic, physical distancing measure was suggested as one of how transmission of the disease can be reduced. At Nesto Hypermarket in Muscat, Mr. Ahmed, the recently appointed Retail Manager, is bound to assume his new role.

a. What are the major challenges you think will be faced by Mr. Ahmed? Discuss.

b. What changes will Mr. Ahmed bring in the retail business and make the customers buy the products? Suggest some promotional strategies which will be used by Mr. Ahmed to increase profit based on the above situation.

1. The positive relationship between inflation and unemployment in the Philips curve comes from that

1. Job searchers underestimate the future inflation
2. Job searchers overestimate the future inflation
3. Firms have no expectation

2. When the Fed buys bonds, it:

1. Changes the size of the money multiplier
2. Decreases the money supply
3. Increases the money supply

3. if people are very sensitive to the interest rate change, which of the following is a more effective policy to control the inflation in the short run?

1. A ten-year tax-cutting plan
2. The Fed buys U.S. bonds from banks
3. A restrictive monetary policy

Modigliani and Miller argued that the value of a firm is separate from the source of financing for its assets. Do you agree? Why or why not?

Do you believe that, for any or all firms, there exists an optimal capital structure?

Why or why not?

How do taxes impact their original findings?

If tax laws changes eliminated the deductibility of interest for corporations, would this motivate or deter corporations from increasing the level of debt in their capital structure? Why?

What is the dividend irrelevance theorem?

State your position on the dividend irrelevance theorem and support it.

What is the Law of One Price?

explain why if interest rates increase after a bond issue, the bond’s price will decline and the yield to maturity will increase.  Explain how the time to maturity impacts the extent to which interest rate changes impact the bond’s price.

Additionally, assume that you have a short investment horizon (less than 1 year). You are considering two investments: a 1-year Treasury security and a 20-year Treasury security. Explain why the longer-term Treasury security would be considered riskier than the shorter-term Treasury security.

1) What is the purpose of Statement of Cash Flows?

2) Why do we need Statement of Cash Flows?

3)Statement of Cash Flows tracks net changes in cash flow. Transactions are grouped into 3 categories, Operating, Financing and Investing.

Provide one sample transaction for Financial Activity Cash Inflow. (i.e. borrow $5000 from the bank)

Provide one sample transaction for Investing Activity Cash Outflow. (i.e. purchase a truck)

4) Companies prefer the Indirect Method for Operating activity. What is the starting point?

In Unit 3 we learn about recognition of revenue and expenses, and the proper timing of their recording in the firm's accounting records.

For those of us accustomed to thinking of revenue and expense occurring at the time payments are made and money changes hands, this may be a new and unfamiliar concept - but it is an important one.

Discuss the difference between accrual basis accounting and cash basis accounting. Please remember to create your submission in your own words. Feel free to include brief quotes from your sources (with citations) but do not copy and paste from the source material.

Bank Of England Rate Cut

On Thursday, Aug 4, 2016 the Bank of England cut its interest rate to 0.25% -- the lowest it’s ever been in the central bank’s 332-year history. They also announced the government would buy government and corporate bonds (quantitative easing). Check out this article in The Guardian. This is all in response to changes in the economy since the UK voted to leave the European Union in June. What is the central bank trying to do – increase the money supply or decrease the money supply? Why? How would that help the economy? Will it work?

Ethel