Assume that (i) if the trial proceeds it is expected to last less than a month and result in two possible outcomes in terms of the price per share established in court: the $273,000 claimed by the plaintiffs, or the $55,400 being defended by Herbert Kohler; (ii) Kohler estimates the probabilities of these outcomes at 30% and 70%, respectively. 5. How would your answer to question 4 change if you also assume that (i) the inheritance tax owed on Frederic Kohler’s estate was 50.2% of its holdings in Kohler Co. (equivalent to 489 shares of the 975 he owned); (ii) the taxes paid by the estate amounted to $27 million (489 shares at $55,400 each); (iii) were the settlement or the trial to result in a revised share price in excess of $55,400, the IRS would likely demand a similar valuation for its claim on Frederic’s estate; and (iv) Herbert Kohler estimates the probability of the IRS’s demand at 100% if he proceeds to trial, and 50% if he
The second ratio measures the effect of interest; it indicates the proportion of earnings before interest and tax that is retained after paying interest. It should be considered together with the leverage component (assets/equity). The third ratio measures the company’s operating profit on sales; it can be broken down into subcomponents such as gross profit margin. Common-sized income statements can help with
As for the balance sheet, it shows the assets, liabilities, and stockholder’s equity for a specified date. The balance sheet reflects the organization’s financial position. The total assets within the balance sheet must equal the total liabilities and stockholder equity. The statement of cash flow states the cash inflows as well as outflows from the operating, financing, and investing transactions during a specific period. It reports the organization’s beginning and ending cash, investing and financing
So, if we take random values for r2 between 0 and 1 then we will get different values of time intervals in weeks between successive breakdowns. 3. Lost revenue It is given that they charge $0.10 per copy and number of copies sold in one day follows a uniform probability distribution between 2000 and 8000 copies. Therefore, if we chose a random variable r3 whose value is in between 2000 and 8000 then the lost revenue will be 0.1×r3×repair time. By putting different values for r3, we can get a number of lost revenues by simulation method.
Study the demand elasticity for its products and discuss the availability of close substitutes for its products. How does that affect pricing decisions? Analyze the company’s profitability. Identify the economy or industry influences on its costs, operations, and profitability. Describe the competitive environment in which the firm operates, the distribution of market power, and the strategic behavior of the firm and its competitors.
This determines the point in which a profit begins to be turned. c. What deficiencies does payback have as a capital budgeting decision method? d. Does payback provide any useful information regarding capital budgeting decisions? e.
1. Which of the following equations properly represents a derivation of the fundamental accounting equation? a. b. c. d. Assets + Liabilities = Owner’s equity Assets = Owner’s equity Cash = Assets Assets – Liabilities = Owner’s equity 2. Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings?
Judgement Case 9-1 – Inventory costs; lower of cost or market; retail inventory method Requirement 1 Theoretically, Hudson should account for the warehousing costs related to its wholesale inventories as a part of inventory. All of the necessary costs associated with preparing, and in this case storing, items for sale are to be included in inventory. The key here is that the warehousing cost is related to a particular set of items and for that reason it is important to account for the warehousing cost with the inventory in order to satisfy the matching principle. The matching principle “requires that revenues and any related expenses be recognized together in the same period” (The matching principle). By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold.
By contrast, the price elasticity of demand tells you “how much” quantity demanded changes when price changes. It shows the responsiveness of a change in quantity demanded to a change in price. [text: E p. 114; MI p. 114] 2. Why do economists use percentages rather than absolute amounts in measuring the responsiveness of consumers to changes in price? There are two basic reasons.
2. Which of the following statements about valuing a firm using the APV approach is most CORRECT? a. The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity. b.