INTERMEDIATE ACCOUNTING II/ Intermediate Accounting, Spiceland/Sepe/Nelson Re: Judgment Case 18-5 Requirement 1. The two alternatives Alcoa has for accounting for the repurchase of it’s shares are: 1) The shares can be formally retired. 2) The shares can be named treasury stock Either way, total shareholders’ equity remains the same. Cash is used to repurchase common stock so the effect is to reduce both cash and shareholders’ equity. This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet.
Dixita Patel Chapter 6 homework Managerial Finance July 31, 2012 Critical Thinking 6.6. Coupon rate: how does bond issuer decide on the appropriate coupon rate to set on its bonds? Explain the difference between the coupon rate and the required return on a bond price? Coupon rate is the annual coupon divided by the face value of a bond. In this case Bond Issuers look at outstanding bonds of comparable maturity and risk.
pref stock is A type of preferred stock with a provision that stipulates that if any dividends have been omitted in the past, they must be paid out to preferred shareholders first, before common shareholders can receive dividends. Sept. 1979 $1.80 Senior convertible cumulative preferred stock July 1980 15% Subordinated debentures Adding $52.5M debt gives Oct. 1980 $1.84 Cumulative convertible preferred stock April 1981 14⅛% Subordinated debtenture Aug. 1981 10¼% Convertible subordinated debenture May 1982 10% Convertible subordinated debenture Sept. 1982 12⅞% Subordinated debenture March 1983 7¾% Convertible subordinated debenture Exhibit 6 Public Sales of
Required 1.Provide a brief written description of the proper accounting treatment, including how the extra $10 paid per share is recorded. Target Inc. buying back their common stock, but they pay more $10 than the market value. Hence, their purchase cost is taken into account instead of market value. Also the extra share will not be recognized as profit or loss but instead capitalized as treasury shares. 2.
Next, each item commitment quantity was calculated using its contribution margin and its total contribution in dollar to the revenue of the company. For e.g. if an item had a margin of $15 if sold, and $5 loss if not sold, the commitment value would be 0.75. Hence the optimal stock to keep would be three quarters of the probability of demand. If for instance, the corresponding error for 0.75 is 1.3, the optimal stock to keep for that item would be 1.3 * frozen forecast.
Seminar 1, Finance Chapter 3 problems: 3.12 Suppose Bank One offers risk-free interest rate of 5,5% on both savings and loans, and Bank Enn offers a risk-free interest rate of 6% of both savings and loans. a) What arbitrage opportunity is available? a. Borrow money from Bank One and invest them at Bank Enn. 3.16 (ETF=exchange traded fund) a) 138 b) Sell the portfolio and buy the ETF c) Reverse, borrow the share of the ETF, buy the portfolio and give back the ETF.
A. I and IV only B. II and III only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV 3. Which one of the following is a capital budgeting decision? A. determining how many shares of stock to issue B. deciding whether or not to purchase a new machine for the production line C. deciding how to refinance a debt issue that is maturing D. determining how much inventory to keep on hand E. determining how much money should be kept in the checking account 4. Decisions made by financial managers should primarily focus on increasing which one of the following? A. size of the firm B. growth rate of the firm C. gross profit per unit produced D. market value per share of outstanding stock E. total sales 5.
What was PacifiCorp Worth before its acquisition by Berkshire? Are we overpaying? We are not overpaying for PacifiCorp. We purchased PacifiCorp, from Scottish Power plc, for $5.1 billion in cash and $4.3 billion in liabilities and preferred stock, for a total of $9.4 billion. Since PacifiCorp is not a publicly traded company, we must use valuation multiples from comparable firms to determine the value of the firm.
For equity I took the number of shares outstanding times the stock price to get 11503.2 million. For debt not much information was given so I used the 1291. 3. Calculate the costs of equity
This make it lucrative for companies to finance with internally generated cash, which is the most liquid asset. A drawback is that Apple earned a mere 0.77% on its cash and investments in fiscal year of 2011 [5]. The disadvantage is that the rate of return is close to the inflation rate. Apple has not debt and therefore no apparent reason to pile up cash, if they cannot invest it at a higher return than their current interest rate allows. Though another way of looking at it is that Apple is only waiting for the really good investments, and that opportunity offset the lost revenue of hoarding cash at a low interest rate.