3. a. What is the best estimate of Ace’s cost of debt? b. Should flotation costs be included in the component cost of debt calculation? Explain.
What is risk tolerance? (0.5 points) is the amount of risk you are able to handle without being too negatively affected by failed investments. 5. What are debt investments? (0.5 points) are investments without ownership that promise a specific return on the investment.
2. I utilized an “Acid Test Ratio” which shows us whether the entity could pay all its current liabilities if they became due now or sooner than expected. In 2011, the acid test ratio was 0.64. By 2012, it decreased to 0.43. Even though the acid-test ratio is less than 1 which rates in the lower third quartile in the industry of 1.6, 0.9 to 0.6, it indicates a concern with repaying current liabilities.
Since Artforever.com is a privately held company, there is little information available to determine the appropriate cost of capital and rate of equity. Thus, a comparable analysis was done utilizing a similar publicly traded company, Arttoday.net. Since Arttoday.net and Artforever.com operate in the same industry, this comparable analysis will provide the information necessary to extrapolate a reasonable estimate of the cost of capital and rate of equity. Arttoday.net has a beta 1.50 and a debt to equity ratio of 0.75. The beta reported is based on the complete capital
What amount of unrealized inter-company profit must be deferred by Luffman? | | Your Answer: | | | $0 | | CORRECT | | | $8,400 | | | | | $28,000 | | | | | $52,000 | | | | | $80,000 | | | | | | Points Received: | 2 of 2 | | Comments: | | 2. | Question: | (TCO 1) Which of the following results in a decrease in the Equity in Investee Income account when applying the equity method? | | Your Answer: | | | Dividends paid by the investor | | | | | Net income of the investee | | INCORRECT | | | Unrealized gain on inter-company inventory transfers for the current year | | CORRECT ANSWER | | | Unrealized gain on inter-company inventory transfers for the prior year | | | | | Extraordinary gain of the investee | | | | | | Points Received: | 0 of 2 | | Comments: | | 3. | Question: | (TCO 1) In a situation where the investor exercises significant influence over the investee, which of the following entries is not actually posted to the books of the investor?
Thus this measure, to buy call options by selling stocks to SBC, is simply speculating. But Cephalon’s shareholders want Cephalon to hedge this risk if DFA doesn’t approve this projection. They want Cephalon to take some measures, such as buying puts, as well as speculating, to hedge the stock price’s downside risk. Capital gains from put option could reduce the loss caused by DFA disapproving the projection. Option Valuation Under SBC’s proposal, Cephalon would purchase 2.5 million capped call options from SBC in exchange for 490,000 shares of Cephalon common stock.
(2,500+4,000+6,500=$13,000) 8-40) A) Charlie is allowed the tax deduction of the charitable contribution at the basis price of $600 because it is defined as ordinary income property. B) Durwood is only allowed to deduct the fair market value of $7,000 because his chartable contribution has decreased from the basis value of $8,000. By tax law he can only deduct the $7,000
only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements. B. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold C. a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline. D. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale. 15) Designated market value A. may sometimes exceed net realizable value. B. should always be equal to net realizable value less a normal profit margin.
A. Th B. Profit maximization C. Risk minimization D. None of the above 4) Which of the following would increase the need for external equity? A. A reduction in corporate profits B. A slow-down in economic growth C. A seasonal reduction in sales revenues D. Inadequate investment opportunities 5) Which of the following does NOT involve underwriting by an investment banker?
The elimination of short-term debt shows that Home Depot, Incorporated is not using such debt to meet short-term cash requirements. The cause of the elimination of short term debt may be caused by the improved cash position and the economy. Home Depot, Incorporated’s financial position and ratios look good. In fiscal year 2008, the long-term debt-to-equity ratio was 54.4% compared to fiscal year 2007’s 64.3%. In fiscal year 2008, the return on invested capital of continuing operations was 9.5% compared to fiscal year 2007’s 13.9%.