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Finance

Nominal rate and Fisher effect

According to the Fisher effect, if the real interest rate is 3 percent and the nominal interest rate is 8 percent, what rate of inflation is the financial marketplace expecting? Explain the reasoning behind your answer. If the nominal rate rises to 11 percent and following the Fisher effect, what would you conclude about the exp

Annual Premiums of a life insurance policy to be charged by an insurance company.

The manager of a life insurance company is trying to decide what annual premium to charge a group of policyholders, each of whom has just received his or her 40th birthday. A check of mortality tables indicates that, for every million persons born 40 years ago, 3percent die, on average, sometime during their 40th year. If the co

managerial finance and linkages

What are the linkages among financial decisions, return, risk and stock value? Why are these linkages important? How does the financial manager incorporate these as s/he manages the assets and liabilities of the firm?

A Discussion on Control Risks

Please discuss the following question and use an example if possible. Question: Define control risk and explain the role of control risk assessment in audit planning.

Quayle Company Kiley Company AR problems

Problem #3 The December 31, 2009 balance sheet of Quayle Company had Accounts Receivable of $500,000 and a credit balance in Allowance for Uncollectible Accounts of $33,000. During 2010, the following transactions occurred: sales on account $1,400,000; sales returns and allowances, $50,000; collections from customers, $1,150

Amortization and Excess Earnings

Question 1: Breaker Company purchased a new piece of equipment on July 1, 2010 at a cost of $300,000. The equipment has an estimated useful life of 5 years and an estimated residual value of $25,000. The current year end is 12/31/10. Breaker records depreciation to the nearest month. The equipment is a Class 8 asset with a ma

Steps to Calculate NPV of a Given Investment Proposal

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.754 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $2,448,000 in annual sales, with costs

Sale of Partially Depreciated Asset

Consider an asset that costs $237,600 and is depreciated straight-line to zero over its 6-year tax life. The asset is to be used in a 2-year project; at the end of the project, the asset can be sold for $29,700. If the relevant tax rate is 31 percent, the aftertax cash flow from the sale of this asset is $ ???? Round your an

Audit Case Study "Lincoln Savings and Loan Association"

Lincoln Savings and Loan Association 1. Arthur Young was criticized for not encouraging Lincoln to invoke the substance-over-form principle when accounting for its large real estate transactions. Briefly describe the substance over form concept and exactly what it requires. What responsibility, if any, do auditors have when a

Determine the Correlation of Determination (r squared), Correlation coefficient "r" (rho symbol = ), Determine (calculate) the Covariance (formula given above) between GM and S&P500

Recall that the correlation coefficient is a single value that captures the direction and extent of linear association between 2 random variables (securities). The formula for measuring covariance is equal to the correlation coefficient (rho) multiplied by the standard deviation for security1 multiplied by the standard deviation

Finance: Exchange, Shareholder Loans, and Other Topics

1. What is the impact on a transferor if a Sec. 351 exchange involves the assumption of the shareholder's liabilities by the corporation? 2. What conditions need to be met to avoid IRS classification of loans from shareholders as equity (contributions to capital)? 3. What is the tax treatment of losses from worthless stock or

Choose best company to invest of EBay, Walt Disney or Costco

Which of these three companies is the best to invest in? E-Bay, the Walt Disney Company, or Costco? Discuss each company using fundamental analysis and/or technical analysis and choose the best one (using current data). Please list any references you used.

EBIT sensitivity for Stewart Industries

Stewart Industries sells its finished product for $9 per unit. Its fixed operating costs are $20,000, and the variable operating cost per unit is $5. a. Calculate the firm's earnings before interest and taxes (EBIT) for sales of 10,000 units. b. Calculate the firm's EBIT for sales of 8,000 and 12,000 units, respectively. c

Equity and Debt

What are the advantages and disadvantages for AMSC to forgo their debt financing and take on equity financing? Do you agree with their decision? How can a company's cost of equity be determined? Is there a tax deduction from the use of debt financing? Please explain. ------------------------------- http://proquest.umi.c

Cost of preferred stock; cost after flotation costs

Taylor Systems has just issued preferred stock. The stock has a 12% annual dividend and a $100 par value and was sold at $97.50 per share. In addition, flotation costs of $2.50 per share must be paid. a. Calculate the cost of the preferred stock. b. If the firm sells the preferred stock with a 10% annual dividend and nets $9

Designing tests - determining objectives to achieve

When you look at designing tests you have to first look at what objectives are you're trying to achieve. For example if you look at cash in banks you know that there are two main objectives: Rights and Existence. The first refers to the right to own without restriction. There are accounts that can be pledged as collateral for a

Identifying the crossover rate in the given case

Using the table identify the "crossover point" AND briefly describe the significance when the crossover rate is greater than the cost of capital for mutually exclusive projects. Why is the IRR method less reliable when evaluating mutually exclusive projects? Discount Rate(%) NPV of Project A NPV of Project B 0

Liquidity of Blackwood Company

Determine the liquidity position of Blackwood Company with the provided financial information. 1.      Determine the liquidity position of Blackwood Company with the provided financial data Blackwood Company Balance Sheets as of December 31, (all numbers in thous

Lincoln Savings and Loan Association

Lincoln Savings and Loan Association 1. Arthur Young was criticized for not encouraging Lincoln to invoke the substance-over-form principle when accounting for its large real estate transactions. Briefly describe the substance over form concept and exactly what it requires. What responsibility, if any, do auditors have when a

Memo to head of HR to convince company to inveset in a new HRIS

Write a briefing memo to convince the management to invest in a new HRIS. Imagine you are the head of the HR department in a company. Your department plans to propose an HRIS initiative to management. As the department head, you will prepare this briefing memo. Make sure you include the following points in the memo: What is

Wicker Company contribution margin and contribution margin ration

For a recent year, Wicker Company had the following sales and expenses: Sales $14,700 Food and packaging $4,133 Payroll 3,700 Occupancy (rent, depreciation, etc.) 4,327 General, selling, and administrative expenses 2,100 $14,260 Income from operations $440 Assume that the variable costs consist of food and p

Watts Co. Adams Corp. Significant Influence -- Impact

On January 4, 2006, Watts Co. purchased 40,000 shares (40%) of the common stock of Adams Corp., paying $800,000. There was no goodwill or other cost allocation associated with the investment. Watts has significant influence over Adams. During 2006, Adams reported income of $200,000 and paid dividends of $80,000. On January 2

Stock Valuation Problem

Use DDM, CAPM, and or the Constant Growth - Two Stage Model to solve valuation for the stocks.