Which of the following statements is CORRECT? a. Dividends paid reduce the net income that is reported on a company’s income statement. b. If a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet.
Case 36C Speculation Corporation Prepared by xxxxxx For Table of Contents Issues………………………………………………………………………………………………………………………………………………………1 Facts………………………………………………………………………………………………………………………………………………………..1 Analysis……………………………………………………………………………………………………………………………………………………7 Conclusion/Recommendations……………………………………………………………………………………..…………………………8 References………………………………………………………………………………………………………………………………………………9 Issues 1. What are the tax consequences of each personal distribution from speculation corporation proposal? Facts Janice Carillo and Ruth Schlinger formed Speculation Corporation (Speculation) ten years ago. At present they each own 30% of the stock of Speculation (30 shares each), Wise Investments, Inc. (Wise) owns 35% of the stock (35 shares), and the balance (5% or five shares) is owned by Thomas Glynn. Noth Wise and Thomas acquired their interest four years ago by purchase from Janice and Ruth.
2. What was your estimate of WACC? What mistakes did Joanna Cohen make in her analysis? Which method is best for calculating the cost of equity? cost of equity =I used the 20 year at 5.74%+Geometric mean=5.9%x most recent beta .69=9.81% Cost of Debt I used Yield to maturity to find cost of debt From Exhibit 4 PV= 95.60 N=40 (20years x 2) since its paid semiannually Pmt=-3.375 (6.75/2) FV=-100 Comp I = 3.58% (semiannual) 7.16% (annual) After tax cost of debt = 7.16%(1-38%) = 4.44% E = market value of the firm's equity To find Market value of Equity you multiply share price by amount of shares $42.09x273.3= 11503.
The accounts receivable turnover decreased from 135.4 in 1984 to 53.9 in 1987 while the age of accounts receivable increased from 2.7 days in 1984 to 6.8 days in 1987 indicate that Crazy Eddie had some problems on realizing accounts receivable. In terms of cash and short-term investments, the cash and restricted cash account for 44.8 percent in 1985 and 3.2 percent in 1987. This change was related to the short-term investments, a drastically increase occurred from zero to 41.4 percent in 1987. This might resulted from the big explosion of opening branches. The convertible subordinated debentures increased
A tax advantage of business combination can occur when the existing owner of a company sells out and receives: a. cash to defer the taxable gain as a “tax-free reorganization” b. stock to defer the taxable gain as a “tax-free reorganization” c. cash to create a taxable gain d. stock to create a taxable gain 2. Publics Company acquired the net assets of Citizen Company during 20X9. The purchase price was $800,000. On the date of the transaction, Citizen had no long-term investments in marketable equity securities and $400,000 in liabilities. The fair value of Citizen assets on the acquisition date was as follows: |Current assets |$ 800,000 | |Noncurrent assets | 600,000 | | |$1,400,000 | How should Publics account for the $200,000 difference between the fair value of the net assets acquired, $1,000,000, and the cost, $800,000?
• having liability exposure similar to that of a sole proprietor. • being taxed like a corporation. • being taxed like a corporation with liability like a partnership. 4. Which one of the following is least apt to help convince managers to work in the best interest of the stockholders?pay raises based on length of service • implementation of a stock option plan • threat of a proxy fight • management compensation tied to the market value of the firm’s stock • threat of a takeover of the firm by unsatisfied stockholders 5. a. Compute the future value of $2,000 compounded annually for 20 years at 4 percent.
• debit to Allowance for Doubtful Accounts for $3,300. Multiple Choice Question 182 The financial statements of the Melton Manufacturing Company reports net sales of $300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days? • 60.8 • 96.1 • 36.5 • 48.7 Find the final exam answers here ACC 291 Final Exam Answers Multiple Choice Question 119 Stine Company purchased machinery with a list price of $64,000. They were given a 10% discount by the manufacturer.
Answer AR= 20x20000=400,000 3-2 Debt Ratio Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Answer Equity multiplier Asset /equity = 2.5/1 A=L+E 2.5=1.5=+1 Debt/asset = 1.5/2.5 = .6 3-3 Market/Book Ratio Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets.
Explain why The Longo Corporation’s cash flow from operations is substantially different than its operating profit/loss E3.19 Permanent versus Transitory Earnings. | | Year 3 | | Year 2 | | Year 1 | | | | | | | | Net income (as reported) | | 1,078 | | (35,866) | | (17,919) | Adjustments: | | | | | | | Impairment of purchased product rights | | - | | 1,134 | | - | Restructuring charges | | - | | 13,623 | | (1,079) | | | | | | | | Loss from equity investments | | (1,111) | | (603) | | (602) | Realized loss on investments | | - | | - | | (220) | Write-down of long-term strategic investments | | - | | (2,780) | | (1238) | | | | | | | | Permanent earnings | | 2189 | | (17726) | | (16938) | Given that Entrust’s share price is only $–__3.8__ at year-end Year 3, it does not appear that the market believes that the company’s improving earnings and cash flow from operations are going to be sustained. CA3.29 The Procter and Gamble Company.
$20,000*20 days outstanding= AR $400,000 3-2 Debt Ratio Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Equity Multiplier= 2.5 Asset/Equity = 2.5/1 1+1.5= 2.5 Debt/Asset= 1.5/2.5= .6 3-3 Market/Book Ratio Winston Washer’s stock price is $75 per share. Winston has $10 billion in total assets.