Is the use of a monthly average price a net advantage or disadvantage to J & L? Using NYMEX contracts will minimize the asset mismatch aspect of basic risk, along with a better liquidity. However, since diesel fuel is not a traded commodity, it cannot be directly hedged and J&L will suffer a certain amount of basis risk. J&L will also need to post a margin for their future contracts at NYMEX. Using product offered by Continental Bank would require a higher cost for J&L, and illiquid compared with NYMEX.
The parent receives annual dividends from the subsidiary of $2,500,000. If the parent's marginal tax rate is 34% and if the exclusion on intercompany dividends is 70%, what is the effective tax rate on the intercompany dividends, and how much net dividends are received? Question 20 New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14% coupon, 30-year bond issue that was issued 5 years ago. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market.
With these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone. Here the issue is of financing the merger. A firm’s optimal capital structure is that mixture of debt and equity than minimizes its weighted average cost of capital (WACC). Since the after-tax cost of debt is lower than equity for many corporations. It turns out that, while debt reduces a company’s tax liability because interest payments are deductible expenses, increasing amounts of debt raise both the cost of equity capital and the interest rate on debt because of the increasing probability of bankruptcy.
It hurts and slows down economic growth. More investments lead to lower prices, more jobs, and overall higher standards of living. The second problem is that with a high national debt, the government has to pay interest to the bondholders. Servicing the debt has been known due to the fact that the government pays interest on
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?
3.1.10 Cash Budget The cash budget is “an estimation of the cash inflows and outflows for a business for a specific period of time. Cash budget are used to assess whether the entity has sufficient cash to fulfil regular operations and whether too much cash is being left in unproductive capacities”. (Reference 2) The cash budget is prepared in advance for the first 6 months, and a cash deficit of £20,364 and £2,228 were incurred in January and February. A second-hand bottling plant was purchased in January which cost £420,000. The business required £30,000 cash for working capital.
This ratio determines the rate and ability in which the company is able to pay its debts off. For Huffman Trucking the calculation would look like this for 2011: $94,520/$466 = 202.83 (Huffman Trucking, 2013). Liabilities and Shareholders' Equity Current Liabilities Accounts Payable $40,843 $45,381 Salaries & Wages 37,299
Conversely, the United States’ output and employment would suffer and lead to larger increases in interest rates over the long term (Page & Reichling, 2012). Higher interest rates would prove extremely detrimental to the economy. Not only would it stifle growth in general, but it would also increase the amount of money the government would have to spend to service its debt. This would hamper government spending that produces a benefit to the economy. Sequestration offers limited austerity now and could reduce the need for more drastic, Greecelike austerity measures in the
The report concludes with a critical assessment of Buffet’s investment philosophies, looking at the impact it has on Berkshire Hathaway and why it is difficult for other investors to replicate Buffet’s strategy and be as successful. The findings indicate that the market reacted positively to the deal, especially for Berkshire Hathaway, beating the average response to an acquisition being announced by over 4%. The increase in Berkshire’s value represents the stock markets opinion on how much they underpaid. Using the enterprise value multiples method, the report finds that the book value of Pacificorp to be $9.2bn, $200m less than the offer value. This implies there is significant intrinsic value when combined with MidAmerican, the new customer base and economies of scale being the 2 most important factors.
“Because and swaps—are instruments for speculation as well as hedges bonuses on Wall Street are tied to transaction volume, this creagainst a drop in an asset’s value. They can be used to bet ates an obvious problem.” that the price of an asset will go up or down. Derivatives also One fear is that losses in the trading department of a large can have more of an effect on a portfolio than simply buying bank, say, could cause a meltdown of the financial system, a or selling a stock or bond because of the leverage involved. scenario that has sometimes prompted calls for stricter regulaLast November, for instance, an investor could buy nearly $1 tion. Critics of government meddling note that these dire million in futures contracts on the Standard & Poor’s 500 In- warnings have never