Mutually Assured Destruction (revisited): Consider the game in section 8.3.3. (a) Find the mixed strategy equilibrium of the war stage game and argue that it is unique. (b) What is the unique sub-game perfect equilibrium that includes the mixed strategy you found above?
> What is an expense ratio? Why is it important?
> Research Information Available from Value Line 1. What other investment information would you need to evaluate Disney common stock? Where would you obtain this information? 2. Assuming you purchased Disney stock on February 7, 2014 and based on your ans
> Closed end, exchange-traded, or open ended mutual funds are available today. Describe the differences between each type of fund.
> Describe each of the following investment techniques. Buy and hold Dollar-cost averaging Direct investment Dividend reinvestment Margin Selling short Options
> Explain the important characteristics of each of the following types of stock transaction orders. Market order Limit order Stop-loss order
> What is the difference between the primary market and the secondary market? What is an initial public offering (IPO)?
> Write the formula for the following stock calculations, and then describe how this formula could help you make a decision to buy or sell a stock. //
> Explain the relationship between earnings and a stock’s market value.
> What is the difference between a prospectus and an annual report?
> Describe how each of the following sources of information could help you evaluate a stock investment. Source of information Type of Information How Could This Help The Internet Stock advisory services A newspaper Government publications Business per
> Why do corporations sell stock? Why do investors purchase stock?
> From an investor’s viewpoint, what is the difference between common stock and preferred stock?
> Starting Early: Retirement and Estate Planning Jamie Lee and Ross now in their fifties, have plenty of time on their hands now that the triplets are away at college. They both realized that time has just flown by; over twenty four years have passed since
> Why do corporations split their stock? Is a stock split good or bad for investors?
> After researching Valero Energy common stock, Sandra Pearson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 300 shares of Valero Energy. At the time of the sale, a share of common stock had a value o
> Bob Orleans invested $3,000 and borrowed $3,000 to purchase shares in Verizon Communications. At the time of his investment, Verizon was selling for $45 a share. a. If Bob paid a $30 commission, how many shares could he buy if he used only his own money
> For four years, Marty Campbell invested $4,000 each year in Harley Davidson. The stock was selling for $36 in 2011, $45 in 2012, $52 in 2013, and $70 in 2014. a. What is Marty’s total investment in Harley Davidson? b. After four years, how many shares do
> Three years ago, James Matheson bought 200 shares of a mutual fund for $23 a share. During the three-year period, he received total income dividends of $0.92 per share. He also received total capital gain distributions of $0.80 per share. At the end o
> Jason Mathews purchased 300 shares of the Hodge & Mattox Energy fund. Each share cost $14.15. Fifteen months later, he decided to sell his shares when the share value reached $17.10. a. What is the amount of his total initial investment? b. What was
> The Yamaha Aggressive Growth fund has a 1.83 percent expense ratio. a. If you invest $55,000 in this fund, what is the dollar amount of fees that you would pay this year? b. Based on the information in this chapter and your own research, is this a low,
> Analysts that follow JP Morgan Chase, one of the nation’s largest providers of financial services, estimate that the corporation’s earnings per share will increase from $5.56 in the current year to $6.12 next year. a. What is the amount of the increase
> Michelle Townsend owns stock in National Computers. Based on information in its annual report, National Computers has reported after-tax earnings of $9,700,000 and has issued 7,000,000 shares of common stock. The stock is currently selling for $32 a sh
> Ruby is 25 and has a good job at a biotechnology company. She currently has $10,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she ret
> 1. It has been suggested by Jamie Lee and Ross’ professional investment counselor to perform a financial check-up as the first step in investing in mutual funds, even though they are investing $50,000 that was inherited from Ross’ late uncle’s estate. I
> Wanda Sotheby purchased 120 shares of Home Depot stock at $82 a share. One year later, she sold the stock for $74 a share. She paid her broker a $34 commission when she purchased the stock and a $39 commission when she sold it. During the 12 months sh
> Sarah and James Hernandez purchased 140 shares of Macy's stock at $57 a share. One year later, they sold the stock for $61 a share. They paid a broker $8 commission when they purchased the stock and a $12 commission when they sold the stock. During th
> The Western Capital Growth mutual fund has Total assets: $750,000,000 Total liabilities: $7,200,000 Total number of shares: 24,000,000 What is the fund’s net asset value (NAV)?
> Over a four-year period, LaKeisha Thompson purchased shares in the Oakmark I Fund. Using the following information, answer the questions that follow. You may want to review the concept of dollar cost averaging in Chapter 12 before completing this probl
> Assume that one year ago, you bought 120 shares of a mutual fund for $33 a share, you received a $0.60 per-share capital gain distribution during the past 12 months, and the market value of the fund is now $38 a share. a. Calculate the total return for y
> Prepare a chart that describes the similarities among the long-term and short-term investment strategies described in this chapter.
> Choose either the Invesco Charter (symbol CHTRX) mutual fund or the Fidelity Fifty (symbol FFTYX) mutual fund. Then describe how each of the following sources of information could help you evaluate one of these funds. a. The Internet b. Professional
> What is the difference between the dividend yield and total return calculations that were described in this chapter?
> Explain the relationship between earnings per share, projected earnings, and the market price for a share of stock.
> 1. Corporations sell common stock to finance their business start-up costs and help pay for expansion and their ongoing business activities. 2. A corporation must pay dividends to stockholders. 3. The record date is the date when a stockholder must be r
> 1. You can’t predict exactly how much money you’ll need when you retire 2. Social Security is an important source of retirement income for most Americans. 3. A defined-contribution plan does not guarantee any particular benefit at retirement. 4 .An execu
> 1. The major reasons why investors purchase mutual funds are professional management and diversification. 2. Shares in a closed-end mutual fund are issued by the investment company only when the fund is organized. 3. Typically, the management fee for a m
> 1. Who elects a corporation’s board of directors? a. Preferred stockholders b. Common stockholders c. The corporation’s top executives d. The corporation’s employees 2. A stock split a. always guarantees that the investor will make money. b. enables man
> 1. The first step in retirement planning is to a. estimate your spending needs. b. estimate the inflation rate. c. evaluate your planned retirement income. d. analyze your current assets and liabilities. 2. Under what retirement plan does your employer
> 1. A mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called a (n) ____________ fund. a. closed end b. open-end c. load d. no-load 2. Some mutual funds charge 12b-1 fees to defray the cost
> What is the major difference between a regular IRA and a Roth IRA?
> What are the most popular personal retirement plans?
> What are the two basic types of employer pension plans?
> What are four major sources of retirement income?
> In your own words, describe how an investment in common stock could help you obtain your investment goals.
> 1. What is the benefit to Jamie Lee and Ross investing in a company’s IPO? Will they be guaranteed a large return from this investment? At this life stage, would you recommend that Jamie Lee and Ross invest in an IPO? Why? 2. Jamie Lee’s father suggest
> Entering an Industry: A firm (player 1) is considering entering an established industry with one incumbent firm (player 2). Player 1 must choose whether to enter or to not enter the industry. If player 1 enters the industry then player 2 can either accom
> Continuous all pay auction: Consider an all-pay auction for a good worth 1 to each of the two bidders. Each bidder can choose to offer a bid from the unit interval so that Si = [0, 1]. Players only care about the expected value they will e
> Brothers: Consider the following game that proceeds in two steps: In the first stage one brother (player 2) has two $10 bills and can choose one of two options: he can give his younger brother (player 1) $20, or give him one of the $10 bills (giving noth
> Market entry: There are 3 firms that are considering entering a new market. The payoff for each firm that enters is 150 / n where n is the number of firms that enter. The cost of entering is 62. (a) Find all the pure strategy Nash equilibria. (b) Find the
> Declining Industry: Consider two competing firms in a declining indus- try that cannot support both firms profitably. Each firm has three possible choices as it must decide whether or not to exit the industry immediately, at the end of this quarter, or a
> Centipedes: Imagine a two player game that proceeds as follows. A pot of money is created with $6 in it initially. Player 1 moves first, then player 2, then player 1 again and finally player 2 again. At each player’s turn to move, he has two possible act
> Monitoring: An employee (player 1) who works for a boss (player 2) can either work (W) or shirk (S), while his boss can either monitor the employee (M) or ignore him (I). Like most employee-boss relationships, if the employee is working then the boss pre
> Strategies and equilibrium: Consider a two player game in which player 1 can choose A or B. The game ends if he chooses A while it continues to player 2 if he chooses B. Player 2 can then choose C or D, with the game ending after C and continuing again w
> Entry Deterrence 1: NSG is considering entry into the local phone market in the Bay Area. The incumbent S&P, predicts that a price war will result if NSG enters. If NSG stays out, S&P earns monopoly profits valued at $10 million (net present value, or NP
> Investment in the Future: Consider two firms that play a Cournot competition game with demand p = 100 − q, and costs for each firm given by ci (qi) = 10qi. Imagine that before the two firms play the Cournot game, firm 1 can invest in cost reduction. If i
> The Value of Commitment: Consider the three period example of a player with hyperbolic discounting described in section 8.3.4 with ln(x) utility in each of the three periods and with discount factors = 1 and = 1/2. We solved the optimal consumption p
> The Industry Leader: Three oligopolists operate in a market with inverse demand given by P (Q) = a−Q, where Q = q1+q2+q3, and qi is the quantity produced by firm i. Each firm has a constant marginal cost of production, c and no fixed cost. The firms choo
> Hyperbolic Discounting: Consider the three period example of a player with hyperbolic discounting described in section 8.3.4 with ln(x) utility in each of the three periods and with discount factors 0 < < 1 and 0 < < 1 (a) Solve the optimal choice o
> Agenda Setting: An agenda-setting game is described as follows. The “issue space” (set of possible policies) is an interval X = [0, 5]. An Agenda Setter (player 1) proposes an alternative x ∈ X against the status quo q = 4 After player 1 proposes x, the
> The Tax Man: A citizen (player 1) must choose whether or not to file taxes honestly or whether to cheat. The tax man (player 2) decides how much effort to invest in auditing and can choose ∈ [0, 1], and the cost to the tax man of investing at level
> Playing it safe: Consider the following dynamic game: Player 1 can choose to play it safe (denote this choice by S), in which case both he and player 2 get a payoff of 3 each, or he can risk playing a game with player 2 (denote this choice
> Let i be a mixed strategy of player i that puts positive weight on one strictly dominated pure strategy. Show that there exists a mixed strategy ’i that puts no weight on any dominated pure strategy and that dominates i.
> Refer to the financial statements of Samsung in Appendix A. What does Samsung title its accounts receivable on its consolidated balance sheet? What are Samsung’s accounts receivable at December 31, 2013? Samsung’s Fin
> Compute Topp Company’s price-earnings ratio if its common stock has a market value of $20.54 per share and its EPS is $3.95. Would an analyst likely consider this stock potentially overpriced, underpriced, or neither? Explain.
> Refer to the information in QS 6-4 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the weighted average method. (Round per unit costs and inventory amounts to cents.)
> Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system). A physical count of its July
> Refer to the information in QS 6-4 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the FIFO method. (Round per unit costs and inventory amounts to cents.) Information fr
> Refer to QS 5-7 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used. Data from QS 5-7: Apr. 1 Sold merchandise for $3,000, granting the customer terms of 2y10, EOM; invoice dat
> Refer to QS 5-4 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used. Data from QS 5-4: Nov. 5 Purchased 600 units of product at a cost of $10 per unit. Terms of the sale are 2/
> Refer to the balance sheet of Google in Appendix A. Does it use the direct write-off method or allowance method in accounting for its accounts receivable? What is the realizable value of its receivables balance as of December 31, 2013? Googleâ
> Refer to the information in QS 6-10 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the LIFO method. (Round per unit costs and inventory amounts to cents.) Data from QS
> Refer to the information in QS 6-10 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the FIFO method. (Round per unit costs and inventory amounts to cents.) Data from QS
> Label the following headings, line items, and notes with the numbers 1 through 13 according to their sequential order (from top to bottom) for presentation of the statement of cash flows. a. “Cash flows from investing activities” title b. “For period End
> Refer to the data in QS 16-11. 1. How much cash is received from sales to customers for year 2015? 2. What is the net increase or decrease in cash for year 2015? Data from QS 16-11: CRUZ, INC. Comparative Balance Sheets December 31, 2015 2015 2014
> Classify the following cash flows as either operating, investing, or financing activities. ______ 1. Sold long-term investments for cash. ______ 2. Received cash payments from customers. ______ 3. Paid cash for wages and salaries. ______ 4. Purchased
> On February 1, 2015, Garzon purchased 6% bonds issued by PBS Utilities at a cost of $40,000, which is their par value. The bonds pay interest semiannually on July 31 and January 31. For 2015, prepare entries to record Garzon’s July 31 receipt of interest
> Prepare Hertog Company’s journal entries to reflect the following transactions for the current year. May 7 Purchases 200 shares of Kraft stock as a short-term investment in trading securities at a cost of $50 per share plus $300 in broker fees. June 6
> On April 18, Riley Co. made a short-term investment in 300 common shares of XLT Co. The purchase price is $42 per share and the broker’s fee is $250. The intent is to actively manage these shares for profit. On May 30, Riley Co. receives $1 per share fro
> On March 1, 2015, a U.S. company made a credit sale requiring payment in 30 days from a Malaysian company, Hamac Sdn. Bhd., in 20,000 Malaysian ringgits. Assuming the exchange rate between Malaysian ringgits and U.S. dollars is $0.4538 on March 1 and $0.
> A U.S. company sells a product to a British company with the transaction listed in British pounds. On the date of the sale, the transaction total of $14,500 is billed as £10,000, reflecting an exchange rate of 1.45 (that is, $1.45 per pound). Prepare the
> Refer to the financial statements and notes of Apple in Appendix A. In its presentation of accounts receivable on the balance sheet, how does it title accounts receivable? What does it report for its allowance as of September 28, 2013? Appleâ€
> The return on total assets is the focus of analysts, creditors, and other users of financial statements. 1. How is the return on total assets computed? 2. What does this important ratio reflect?
> On July 1, 2015, Advocate Company exercises an $8,000 call option (plus par value) on its outstanding bonds that have a carrying value of $416,000 and par value of $400,000. The company exercises the call option after the semiannual interest is paid on J
> Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 1⁄4. Prepare the journal entry for the issuance
> Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1⁄2. Prepare the journal entries for the issuance
> Algoma, Inc., signs a five-year lease for office equipment with Office Solutions. The present value of the lease payments is $15,499. Prepare the journal entry that Algoma records at the inception of this capital lease.
> Jin Li, an employee of ETrain.com, leases a car at O’Hare airport for a three-day business trip. The rental cost is $250. Prepare the entry by ETrain.com to record Jin Li’s short-term car lease cost.
> Madrid Company plans to issue 8% bonds on January 1, 2015, with a par value of $4,000,000. The company sells $3,600,000 of the bonds on January 1, 2015. The remaining $400,000 sells at par on March 1, 2015. The bonds pay interest semiannually as of June
> Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 1⁄4. The effective interest method is used to al
> Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 14%, which implies a selling price of 75 1⁄4. The effective interest method is used to al
> Compute the debt-to-equity ratio for each of the following companies. Which company appears to have a riskier financing structure? Explain.
> On September 15, Krug Company purchased merchandise inventory from Makarov with an invoice price of $35,000 and credit terms of 2/10, n/30. Krug Company paid Makarov on September 28. Prepare any required journal entry (ies) for Krug Company (the purcha
> Murray Company borrows $340,000 cash from a bank and in return signs an installment note for five annual payments of equal amount, with the first payment due one year after the note is signed. Use Table B.3 in Appendix B to compute the amount of the an
> Prepare journal entries to record the following transactions for Emerson Corporation. July 15 Declared a cash dividend payable to common stockholders of $165,000. Aug. 15 Date of record is August 15 for the cash dividend declared on July 15. Aug. 31
> Prepare the journal entry to record Autumn Company’s issuance of 63,000 shares of no-par value common stock assuming the shares: a. Sell for $29 cash per share. b. Are exchanged for land valued at $1,827,000.
> Prepare the journal entry to record Zende Company’s issuance of 75,000 shares of $5 par value common stock assuming the shares sell for: a. $5 cash per share. b. $6 cash per share.
> Air France-KLM reports the following equity information for its fiscal year ended March 31, 2014 (euros in millions). Prepare its journal entry, using its account titles, to record the issuance of capital stock assuming that its entire par value stock wa
> The stockholders’ equity section of Montel Company’s balance sheet follows. The preferred stock’s call price is $40. Determine the book value per share of the common stock. Preferred stock-5% cum
> Epic Company earned net income of $900,000 this year. The number of common shares outstanding during the entire year was 400,000, and preferred shareholders received a $20,000 cash dividend. Compute Epic Company’s basic earnings per share.
> Murray Company reports net income of $770,000 for the year. It has no preferred stock, and its weighted average common shares outstanding is 280,000 shares. Compute its basic earnings per share.
