The Railway Service in Andaleland

The Railway service industry in Andaleland is categorised into groups according to the areas of operation and revenue. International rail services are offered by firms who own large and luxurious trains that travel to just about anywhere in the continent. Companies in this segment typically have revenues in excess of $1 billion. National trains have revenues between $100 million and $1 billion and travel domestically only. Regional rail companies have smaller trains with revenues below $100 million. Cargo trains do not carry commercial passengers. They specialise in the transportation of goods.

The suppliers to the railway industry are caterers, railway stations, train manufacturers and security firms which are oligopolies, meaning that the railway companies are in a less advantageous position. Key suppliers include manufacturers of trains Zanzi and Taraget who dominate the market and are able to garner significant profits at the railway companies’ expense by virtue of their specialised position. Another key supply for the industry is fuel, the price of which is currently proving a very problematic issue for companies.

The top three competitors are Virgin, Bota and Dannes railway companies. Other competitors include TubaTran, Canker Rail, Andale West, Continental Rails, Jama Rail, Atlantic Rail Northwest Rail, Southwest Rail and Una Railways. Most rail companies make extremely low returns; indeed many are currently losing as the industry is characterised by many price wars. Most railway companies also compete with non-price competitive tactics such as frequent traveller programs.

The customers of the industry can be categorised into three groups; business travellers, leisure travellers and buyers of large blocks of seats known as consolidators, who buy excess seat inventory at large discounts. Switching costs are very low and buyers are price sensitive.

Communication technology has proven to be a viable substitute for some form of business travel. Also, alternatives such as auto travel and bus transportation exist for leisure travellers who frequent regional and national train travel.

The capital intensity of the railway industry would appear to pose a formidable entry barrier. However, Atlantic Rail, TubeTran and other entrants have proven that financing is available when there is a convincing business plan and when economic conditions are conducive to the business. Brand name and frequent traveller plans would also seem to be deterrents to entry however, Atlantic Rail’s success demonstrates that customers are willing to switch to other railway companies if the price is right.

(Source: Adapted from Carpenter et al, (2011) Strategic Management, A Dynamic Perspective, New Jersey, Pearson Prentice Hall)

a. Identify four strategic groups in the railway service industry and explain why they do not compete directly against each other in the industry

b. Examine two barriers in the case that could act as obstruction to keep away new entrants from entering and reducing the profits of the established firms.

c. Explain two reasons why these barriers have or have not been effective in preventing new entrants from entering the industry

d. Identify two supplier groups in the industry and explain why they have high bargaining power over the rail companies.

e. Explain how two substitute services would pose a threat to the profitability of the companies in the industry?

The following options prices were observed for calls and puts on Lannister Ltd for the trading day of July 6 2019. Use this information in Questions 3-8. The stock was priced at $163.37. The expirations were July 17, August 21 and October 16. The continuously compounded risk-free rates associated with the three expirations were 0.0517, 0.0542 and 0.0565, respectively. The options have European expiries.

Question: Showing all formula and workings where applicable; Let the standard deviation of the continuously compounded return on the stock be 20 percent. Ignore dividends. Respond to the following:

1. What is the theoretical fair value of the October 165 call? Calculate this answer by hand and then re-calculate it using BlackScholesMertonBinomial10e.xlsm.
2. Based on your answer in part a, recommend a riskless strategy.
3. If the stock price decreases by $1, how will the option position offset the loss on the stock?
4. Use the Black-Scholes-Merton European put option pricing formula for the October 160 put option. Repeat parts a, b and c of Question 3 with respect to the put.
5. Buy 100 shares of Lannister Ltd at $163.37 and short one October 165 call. Hold the position until expiration. Determine the profits and graph the results. Identify the strategy, breakeven stock price at expiration, the maximum profit, and the maximum loss. Discuss any special considerations associated with this strategy. Note: use the OptionStrategyAnalyzer10e.xlsm to obtain the required payoff diagram.
6. Buy 100 shares of Lannister Ltd at $163.37 and go long one October 160 put. Hold the position until expiration. Determine the profits and graph the results. Identify the strategy, breakeven stock price at expiration, the maximum profit, and the maximum loss. Discuss any special considerations associated with this strategy. Note: use the OptionStrategyAnalyzer10e.xlsm to obtain the required payoff diagram.
7. Construct an options strategy by going short one October 160 call and long one October 165 call using Lannister Ltd options. Hold the position until expiration. Determine the profits and graph the results. Identify the strategy, breakeven stock price at expiration, the maximum profit, and the maximum loss. Discuss any special considerations associated with this strategy. Note: use the OptionStrategyAnalyzer10e.xlsm to obtain the required payoff diagram.
8. Construct an options strategy by going long one October 165 put and long one October 165 call using Lannister Ltd options. Hold the position until expiration. Determine the profits and graph the results. Identify the strategy, breakeven stock price at expiration, the maximum profit, and the maximum loss. Discuss any special considerations associated with this strategy. Note: use the OptionStrategyAnalyzer10e.xlsm to obtain the required payoff diagram

Assume that you are an investment analyst preparing an analysis of an investment opportunity for a client. Your client is considering the acquisition of an apartment complex from a developer at the point in time when the apartments are ready for first occupancy. You have developed the following information.

1) Number of units = 40

2) First year market rent per unit = $430 per month

3) Rent is projected to increase by 8% each year

4) Annual vacancy rate = 3% of PGI

5) Annual collection loss = 2% of PGI

6) Annual operating expense = 35% of EGI

7) Miscellaneous yearly income (parking and washers/dryers) = $800

8) Annual miscellaneous income is expected to remain constant

9) Purchase price = $2,000,000

10) Estimated value of land = $600,000

11) Anticipated mortgage terms: a) Loan to value ratio = .80 b) Interest rate = 6% c) Years to maturity = 25 d) Points charged = 3 e) Prepayment penalty = 2% of outstanding balance f) Level payment, fully amortized g) Fixed interest rate, monthly payments

12) Anticipated holding period = 4 years

13) Proportion by which property is expected to appreciate during the holding period -- 5.5% a year

14) Estimated selling expenses as proportion of future sales price = 5%

15) Marginal income tax rate for the client = 28%

16) It is assumed that the property is put into service on January 1st and sold on December 31st

17) Assume the client is "active" in the property management

18) It is assumed that the client has an adjusted gross income of $95,000 and has no other passive income not offset by other passive losses (for each year of the anticipated holding period)

19) Client's minimum required after tax rate of return on equity = 12.5% Calculate:

b. For the first year of operation the:

(1) Overall (cap) rate of return

(2) Equity dividend rate
(3) Gross income multiplier

(4) Debt coverage ratio

Please show work!

On 1 April 2018, Shen Ltd acquired specialized equipment by issuing $2,700,000 of face value, 9% ten-year bonds to the equipment’s manufacturer. No cash changed hands. The bonds will pay interest semi-annually, beginning with the first payment due on 1 October 2018. The market interest rate on the issue date was 10%. The equipment, which was available for use immediately, will be depreciated under the declining balance method at 30%. The estimated residual value is $200,000. Ignore GST. Round to two decimal places.

Required:

1. Prepare the journal entry for equipment purchase/bond issuance on 1 April 2018.
2. Shen Ltd adjusts and closes its books annually on 31 July. Prepare Shen Ltd’s two required adjusting journal entries on that date. For depreciation purposes, you may use a cost figure of $2,500,000.
3. Prepare the journal entry for the first payment due on 1 October 2018.
4. On 1 April 2019, after the interest was paid, Shen Ltd and the equipment’s manufacturer agreed that the bonds would be redeemed at a market price of 93.

1. Prepare the journal entry to record the redemption. (Assume that Shen Ltd’s carrying value for the bonds on the redemption date was $2,542,491.)
2. At a market price of 93, was the market interest rate on the date of redemption greater than, less than, or equal to 9%? Explain your answer.

5. Assume the redemption resulted in a gain for Shen Ltd. You have been asked to help assess the immediate impact of the redemption on Shen Ltd’s return on asset ratio. In your answer, first identify the numerator and denominator of the ratio; then explain the impact, if any, on the numerator; finally, explain the impact, if any, on the denominator. Then conclude as to the overall effect.
6. Ignore d) above and assume Shen Ltd will redeem the bonds at maturity.
   1. How much interest expense will be recognised over the life of the bonds?
   2. Why isn’t the total amount of interest expense shown as a liability on 1 April 2018, given that it is highly probable that Shen Ltd will pay (relevance) and the amount can be measured without error (faithful representation)?

The company has three bond issues and uses the effective interest method to amortize discounts/premiums.  Information for each is below:

There was a bond issue with a par value of $250,000 on July 1, 2015 when the market rate of interest was 6%.  The bonds have a coupon rate of 5% and interest is paid semiannually on January 1 and July 1. The bonds have a ten-year life when issued. This bond issue is convertible into common stock at the rate of 10 shares for every $1,000 of face value (note - common stock has a par value of $10 per share).  On January 2, 2019, $50,000 of face value was converted into common stock. The company uses the book value method to record conversions. The market price of the stock was $90 per share when the bonds were converted.

On May 1, 2015, the company had a bond issue with principal of $200,000.  The bond issue has a seven-year life. Interest is payable semi-annually on May 1 and November 1.  The coupon rate is 7%. The market rate of interest at issue was 6%. On November 2, 2020, the company called the entire bond issue at 115.  

On November 1, 2014, the company issued serial bonds at par.  The face value of the issue was $150,000, and the coupon interest rate is 6%.  Interest is paid annually on November 1st. The principal will be paid with six equal payments of $30,000 on November 1, 2015 through November 1, 2019.

Required:

Compute the price of the first two bonds (the serial bonds are issued at par).

Prepare amortization tables (effective interest method) for the first two bonds from the issuance date.  

Prepare all journal entries needed for each bond from the date of issue through December 31, 2017.  The company has a year-end of December 31st.

Prepare the journal entry to record the bond conversion (first bond) on January 2, 2019.

Prepare the journal entry to record the bond call (second bond) on November 2, 2020

On 1 April 2018, Shen Ltd acquired specialised equipment by issuing $2,700,000 of face value, 9% ten-year bonds to the equipment’s manufacturer. No cash changed hands. The bonds will pay interest semi-annually, beginning with the first payment due on 1 October 2018. The market interest rate on the issue date was 10%. The equipment, which was available for use immediately, will be depreciated under the declining balance method at 30%. The estimated residual value is $200,000. Ignore GST. Round to two decimal places.

Required:

1. Prepare the journal entry for equipment purchase/bond issuance on 1 April 2018.
2. Shen Ltd adjusts and closes its books annually on 31 July. Prepare Shen Ltd’s two required adjusting journal entries on that date. For depreciation purposes, you may use a cost figure of $2,500,000.
3. Prepare the journal entry for the first payment due on 1 October 2018.
4. On 1 April 2019, after the interest was paid, Shen Ltd and the equipment’s manufacturer agreed that the bonds would be redeemed at a market price of 93.

1. Prepare the journal entry to record the redemption. (Assume that Shen Ltd’s carrying value for the bonds on the redemption date was $2,542,491.)
2. At a market price of 93, was the market interest rate on the date of redemption greater than, less than, or equal to 9%? Explain your answer.

5. Assume the redemption resulted in a gain for Shen Ltd. You have been asked to help assess the immediate impact of the redemption on Shen Ltd’s return on asset ratio. In your answer, first identify the numerator and denominator of the ratio; then explain the impact, if any, on the numerator; finally, explain the impact, if any, on the denominator. Then conclude as to the overall effect.
6. Ignore d) above and assume Shen Ltd will redeem the bonds at maturity.
   1. How much interest expense will be recognised over the life of the bonds?
   2. Why isn’t the total amount of interest expense shown as a liability on 1 April 2018, given that it is highly probable that Shen Ltd will pay (relevance) and the amount can be measured without error (faithful representation)?

A clothing store sells shoes, pants, and tops. The store also allows a customer to buy an “outfit,” which consists of three items: one pair of shoes, one pair of pants, and one top. Each clothing item has a description and a price. The four type of clothing items are represented by the four classes Shoes, Pants, Top, and Outfit. All four classes implement the following ClothingItem interface.

public interface ClothingItem

{
   /** Return the description of the clothing item *//

   String getDescription();

   /** Return the price of the clothing item */

   double getPrice();

}

The following diagram shows the relationship between the ClothingItem interface and the Shoes, Pants, Top, and Outfit classes.

The store allows customers to create Outfit clothing items, each of which includes a pair of shoes, pants, and a top. The description of the outfit consists of the description of the shoes, pants, and top, in the order, separated by “/” and followed by a space and “outfit”. The price of an outfit is calculated as follows. If the sum of the prices of any two items equals or exceeds $100, there is a 25% discount on the sum of the prices of all three items. Otherwise, there is a 10% discount.

For example, an outfit consisting of sneakers ($40), blue jeans ($50), and a T-shit ($10), would have the name “sneakers/blue jeans/T-shirt outfit” and a price of 0.90(40 + 50 +10) = $90.00. An outfit consisting of loafers ($50), cutoffs ($20), and dress-shirt ($60), would have the description “loafers/cutoffs/dress-shirt outfit” and a price of 0.75(50 + 20 + 60) = $97.50

Write the Outfit class the implements the ClothingItem interface. Your implementation must include a constructor that takes three parameters representing a pair of shoes, pants, and a top, in that order.

A client class that uses the Outfit class should be able to create an outfit, and its description, and get its price. Your implementation should be such that the client code has the following behavior:

Shoes shoes;

Pants pants;

Top top;

/* Code to initialize shoes, pants, and top */

ClothingItem outfit =

   new Outfit(shoes, pants, top); //Compiles without error

ClothingItem outfit =

   new Outfit(pants, shoes, top); //Compile-time error

ClothingItem outdit =

   new Outfit(shoes, top, pants); //Compile-time error

The financial data for a corporation is provided to calculate all the following question. Most recent annual common dividend $4.00 Today’s common stock price $50.00 U.S. Treasury 10y annual rate 3 percent Market risk premium 5 percent Equity Risk Premium on Bond Yield 10 percent Number of common shares outstanding 2.5 million Today’s preferred stock price $100.00 Fixed preferred dividend $8.00 Constant growth rate 6 percent Beta β 2.0 Floatation costs for Preferred and common stock issuance 7 percent Market price of the bond $1,100.00 Annual coupon on the bond $70.00 Years to bond maturity 5 years Par value bond $1,000 Number of preferred shares outstanding 200,000 Number of bonds outstanding 200,000 Previous year annual Income Statement (amounts in millions) Sales $200,000 Variable operating costs (60% of sales) (120,000) Gross profit 80,000 Fixed operating costs (40,000) Net operating income (EBIT) 40,000 Interest expense (10,000) Taxable income 30,000 Taxes (12,000) Net income $18,000 Company can raise more debt by selling 50,000 new bonds at the same rate (interest) and receiving the market price of the bond i.e. $1,100. The outstanding 200,000 bonds and the additional 50,000 is the maximum the company can raise in debt. After this amount, the average after tax cost of debt will be increased by 1 percent. In the upcoming annual financial results, the company expects to generate 75 million dollars in retained earnings for the capital budgeting projects. Any requirement of funds beyond this would require issuance of new stock at the market price of $50 per share while maintaining the existing capital structure. Company has following projects for consideration Projects Investment Expected MIRR A $50 million 13 percent B $60 million 10 percent C $100 million 8 percent D $10 million 7.5 percent

Refer to the date set:  The cost of debt at the current market price is:

4) A clothing store sells shoes, pants, and tops. The store also allows a customer to buy an “outfit,” which consists of three items: one pair of shoes, one pair of pants, and one top. Each clothing item has a description and a price. The four type of clothing items are represented by the four classes Shoes, Pants, Top, and Outfit. All four classes implement the following ClothingItem interface.

public interface ClothingItem

{
   /** Return the description of the clothing item *//

   String getDescription();

   /** Return the price of the clothing item */

   double getPrice();

}

The following diagram shows the relationship between the ClothingItem interface and the Shoes, Pants, Top, and Outfit classes.

The store allows customers to create Outfit clothing items, each of which includes a pair of shoes, pants, and a top. The description of the outfit consists of the description of the shoes, pants, and top, in the order, separated by “/” and followed by a space and “outfit”. The price of an outfit is calculated as follows. If the sum of the prices of any two items equals or exceeds $100, there is a 25% discount on the sum of the prices of all three items. Otherwise, there is a 10% discount.

For example, an outfit consisting of sneakers ($40), blue jeans ($50), and a T-shit ($10), would have the name “sneakers/blue jeans/T-shirt outfit” and a price of 0.90(40 + 50 +10) = $90.00. An outfit consisting of loafers ($50), cutoffs ($20), and dress-shirt ($60), would have the description “loafers/cutoffs/dress-shirt outfit” and a price of 0.75(50 + 20 + 60) = $97.50

Write the Outfit class the implements the ClothingItem interface. Your implementation must include a constructor that takes three parameters representing a pair of shoes, pants, and a top, in that order.

A client class that uses the Outfit class should be able to create an outfit, and its description, and get its price. Your implementation should be such that the client code has the following behavior:

Shoes shoes;

Pants pants;

Top top;

/* Code to initialize shoes, pants, and top */

ClothingItem outfit =

   new Outfit(shoes, pants, top); //Compiles without error

ClothingItem outfit =

   new Outfit(pants, shoes, top); //Compile-time error

ClothingItem outdit =

   new Outfit(shoes, top, pants); //Compile-time error

Write your solution below.

How to make a flow chart out of this???

To compute the rates you have the following established: 1. Regular service - $6.00 plus first 50 minutes free. Charges for over 50 minutes are $0.20 per minute. 2. Premium service - $15.00 plus: a. For calls made from 6:00am to 6:00pm, the first 75 minutes are free; charges for over 75 minutes are $0.10 per minute. b. For calls made from 6:00pm to 6:00am, the first 100 minutes are free; charges for over 100 minutes are $0.05 per minutes. Task Your task at the moment is to calculate and print out the bill for your customers. Your program should: 1. prompt the user to enter an account number, 2. a service code (type char), a. A service code of r or R means regular service b. A service code of p or P means premium service c. Treat any other character as an error 3. the number of minutes the service was used. Your program should output the account number, type of service, number of minutes the telephone service was used, and the amount due from the user. For the premium service, the customer may be using the service during the day and the night. Therefore, to calculate the bill, you must ask the user to input the number of minutes the service was used during the day and the number of minutes the service was used during the night. Concepts to follow: 1. Assign values to all constant variables that are associated with charges and number of minutes provided in the problem description. 2. The only information the user enters are: account number, type of service, minutes used, and day/night time minutes used based on the plan they have. 3. Remember you are dealing with money therefore should only have 2 decimal places. 4. You must use both a switch statement AND if/else, if/else if’s, or if’s as you see fit. 5. Keep in mind to check for input validation. If validation is incorrect you should have an error message and “kill” your program. 6. Do not use loops

// Cellphone use
#include <iostream>
#include<conio.h>
#include <iomanip>
using namespace std;
int account_number;
float minutes;
char service;
float amount_due;
float day_min;
float night_min;
float regular();
float premium();
int main()
{

cout<< "Please enter your account number: " ;
cin >> account_number;
cout<< "Do you have Regular service or Premium service (r or p)? ";
cin >> service;
// cout<< service <<endl;;
if (service == 'r' || service == 'R')
regular();
else if (service == 'p' || service == 'P')
premium();
else
{
cout<< "Wrong input, program terminated!" << endl;
getch();
return 1;
}
getch();
return 0;

}
float premium()
{

cout<< "How many minutes were used during the day? ";
cin >> day_min;
cout<< "How many minutes were used during the night? ";
cin >>night_min;
if (day_min > 75)
{
amount_due = ((day_min - 75) * .10)+ 15.00;
}
if (night_min > 100)
{
amount_due = ((day_min - 100) * .05)+ 15.00;
}
amount_due = amount_due + 15.00;
cout<< fixed << showpoint << setprecision(2);
cout<< "Amount due: $" << amount_due << endl;
cout<< "Account number: "<< account_number <<endl;
cout<< "Service type: "<< service << endl;
cout<< "Minutes used: "<< (day_min+night_min) <<endl;

return 0;
}
float regular ()
{
cout<< "How many minutes were used? ";
cin >> minutes;
if (minutes <= 50.00)
{
amount_due = 6.00;
cout<< fixed << showpoint << setprecision(2);
cout<< "Amount due: $" << amount_due << endl;
cout<< "Account number: "<< account_number <<endl;
cout<< "Service type: "<< service << endl;
cout<< "Minutes used: "<< minutes <<endl;

}
else
{
amount_due = ((minutes -50.00) * 0.20);
cout<< setw(2) << showpoint << setprecision(3)<< "Amount due: $"<< amount_due << endl;
cout<< "Account number: "<< account_number <<endl;
cout<< "Service type: "<< service << endl;
cout<< "Minutes used: "<< minutes <<endl;
}
getch();
return 0;

}