Question: Revtek, Inc., has an equity cost of

> Doyle Company issued $500,000 of 10-year, 7 percent bonds on January 1, Year 2. The bonds were issued at face value. Interest is payable in cash on December 31 of each year. Doyle immediately invested the proceeds from the bond issue in land. The land wa

> On January 1, Year 1, Sayers Company issued $280,000 of five-year, 6 percent bonds at 102. Interest is payable semiannually on June 30 and December 31. The premium is amortized using the straight-line method. Required a. Determine the amount of cash pro

> On January 1, Year 1, Price Co. issued $190,000 of five-year, 6 percent bonds at 96½. Interest is payable annually on December 31. The discount is amortized using the straight-line method. Required a. Determine the amount of cash proceeds received by Pri

> Vail Book Mart sells books and other supplies to students in a state where the sales tax rate is 8 percent. Vail Book Mart engaged in the following transactions for Year 1. Sales tax of 8 percent is collected on all sales. 1. Book sales, not including sa

> At the beginning of Year 1, Copeland Drugstore purchased a new computer system for $52,000. It is expected to have a five-year life and a $7,000 salvage value. Required a. Compute the depreciation for each of the five years, assuming that the company use

> Golden Manufacturing Company started operations by acquiring $150,000 cash from the issue of common stock. On January 1, Year 1, the company purchased equipment that cost $120,000 cash, had an expected useful life of six years, and had an estimated salva

> The following events apply to Gulf Seafood for the Year 1 fiscal year: 1. The company started when it acquired $60,000 cash by issuing common stock. 2. Purchased a new cooktop that cost $40,000 cash. 3. Earned $72,000 in cash revenue. 4. Paid $25,000 cas

> On January 1, Year 1, three companies purchased the same make and model copy machine. However, each company made different assumptions regarding the useful life and salvage value of its particular asset. Required a. Divide the class into groups of four o

> Obtain Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com using the instructions in Appendix B, and use it to answer the following questions: a. What was Target’s net income for 2018 (

> You have been hired as a consultant by CARE (Conservatives Are Responsible), a political action committee focusing on fiscal responsibility. The Florida chapter has become increasingly worried about the state’s indebtedness. In an effort to assess the ex

> Brown Company contracts with Sebastian Company to exchange refrigerated trucks. Brown Company will trade three SMC trucks for four DROF trucks owned by Sebastian Company. The DROF refrigerated trucks have a cost of $100,000 and accumulated depreciation u

> Brown Company contracts with Sebastian Company to exchange refrigerated trucks. Brown Company will trade three SMC trucks for four DROF trucks owned by Sebastian Company. The trucks are approximately the same age and have the same remaining useful lives.

> Using the data in Table 10.2, a. What was the average annual return of Microsoft stock from 2005–2017? b. What was the annual volatility for Microsoft stock from 2005–2017? Data from Table 10.2:

> What if the last two and a half decades had been “normal”? Download the spreadsheet from MyLab Finance containing the data for Figure 10.1. a. Calculate the arithmetic average return on the S&P 500 from 1926 to 198

> Procter and Gamble (PG) paid an annual dividend of $2.87 in 2018. You expect PG to increase its dividends by 8% per year for the next five years (through 2023), and thereafter by 3% per year. If the appropriate equity cost of capital for Procter and Gamb

> In September 2008, the IRS changed tax laws to allow banks to utilize the tax loss carry forwards of banks they acquire to shield up to 100% of their future income from taxes (prior law restricted the ability of acquirers to use these credits). Suppose F

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. Compare Mydeco’s accounts payable days in 2015 and 2019. b. Did this change in accounts payable days improve or worsen Mydeco’s ca

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. How did Mydeco’s accounts receivable days change over this period? b. How did Mydeco’s inventory days change over this period? c.

> At the end of 2017, Apple had cash and short-term investments of $74.18 billion, accounts receivable of $17.87 billion, current assets of $128.65 billion, and current liabilities of $100.81 billion. a. What was Apple’s current ratio? b. What was Apple’s

> Clarke Company traded a used mixing machine for a new model. The used machine has a book value of $11,000 (cost $32,000 less $21,000 accumulated depreciation) and a fair market value of $8,000. The new mixing machine has a list price or fair value of $31

> At the end of 2017, Walmart Inc. (WMT) reported annual revenues of $500.34 billion, gross profit of $126.95 billion, and net income of $9.86 billion. Costco Wholesale Corporation (COST) had revenue of $129.03 billion, gross profit of $17.14 billion, and

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. What were Mydeco’s gross margins each year? b. Comparing Mydeco’s gross margin, EBIT margin, and net profit margin in 2015 to 2019

> Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2017 (filed in October 2017). Answer the following questions from the notes to their financial statements: a. How many stores (warehouses) did Costco open outside

> Your manager was so impressed with your work analyzing the return and standard deviations of the 12 stocks that he would like you to continue your analysis. Specifically, he wants you to update the stock portfolio by: - Rebalancing the portfolio with the

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. What were Mydeco’s retained earnings each year? b. Using the data from 2015, what was Mydeco’s total stockholdersâ€&#15

> Use the incremental IRR rule to correctly choose between the investments in Problem 23 when the cost of capital is 7%. At what cost of capital would your decision change? Data from Problem 23: You are deciding between two mutually exclusive investment o

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. In what year was Mydeco’s net income the lowest? b. In what year did Mydeco need to reduce its cash reserves? c. Why did Mydeco need to reduce its c

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. From 2015 to 2019, what was the total cash flow from operations that Mydeco generated? b. What fraction of the total in (a) was spent on capital expenditures? c. What

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Use the data from the balance sheet and cash flow statement in 2015 to determine the following: a. How much cash did Mydeco have at the end of 2014? b. What were Mydeco&

> How are the following companies utilizing new technology in the provision of financial services? a. Wealthfront b. LendingTree c. Metromile d. Acorns

> Clayton Company exchanged a used machine with a book value of $26,000 (cost $54,000 less $28,000 accumulated depreciation) and cash of $8,000 for a delivery truck. The machine is estimated to have a fair market value of $36,000. The cash flows related to

> Why has finance historically been an early adopter of new technology?

> Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2017 (filed in October 2017). Answer the following questions from their cash flow statement: a. How much cash did Costco generate from operating activities in fisc

> Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2017 (filed in October 2017). Answer the following questions from their balance sheet: a. How much cash did Costco have at the end of the fiscal year? b. What were

> Suppose a firm’s tax rate is 25%. a. What effect would a $10 million operating expense have on this year’s earnings? What effect would it have on next year’s earnings? b. What effect would a $10 million capital expense have on this year’s earnings if the

> Today is March 30, 2018, and you have just started your new job with a financial planning firm. In addition to studying for all your license exams, you have been asked to review a portion of a client’s stock portfolio to determine the risk/return profile

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco’s costs and expenses had been the same fraction of revenues in 2016– 2019 as they were in 2015. What would Mydeco&acir

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12 million at the end of 2016, and this equipment was depreciated by $4 million per year in 2017, 2018, and 2019.

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 2 million shares each year from 2016 to 2019. What would its earnings per share be in years 2016–2019? (Assume Mydeco pays f

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. By what percentage did Mydeco’s revenues grow each year from 2016–2019? b. By what percentage did net income grow each year? c. Wh

> Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2017 (filed in October 2017). Answer the following questions from their income statement: a. What were Costco’s revenues for fiscal year 2017? By what percentage d

> Doris Company traded a tract of land to Rick’s Real Estate for a similar tract of land with no significant effect on future cash flows. The old land had a carrying value of $6,500,000. The land was appraised for $9,000,000. As part of the exchange, Doris

> Suppose that in 2019, Global launches an aggressive marketing campaign that boosts sales by 15%. However, their operating margin falls from 5.57% to 4.50%. Suppose that they have no other income, interest expenses are unchanged, and taxes are the same pe

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. What is Mydeco’s market capitalization at the end of each year? b. What is Mydeco’s market-to-book ratio at the end of each year?

> In early 2018, Abercrombie & Fitch (ANF) had a book equity of $1250 million, a price per share of $22.48, and 68.4 million shares outstanding. At the same time, The Gap (GPS) had a book equity of $3140 million, a share price of $31.74, and 389 million sh

> In early 2015, Ford Motor (F) had a book value of equity of $24.8 billion, 4.0 billion shares outstanding, and a market price of $16 per share. Ford also had cash of $21.7 billion, and total debt of $119.2 billion. Three years later, in early 2018, Ford

> Repeat Problem 6 assuming the corporation is an S corporation. Data from Problem 6: You are a shareholder in a C corporation. The corporation earns $2 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a

> As a new analyst for a large brokerage firm, you are anxious to demonstrate the skills you learned in your MBA program and prove that you are worth your attractive salary. Your first assignment is to analyze the stock of the Columbia Sportswear Corporati

> In 2018, Mastercard Incorporated had a market capitalization of $200 billion, debt of $6.5 billion, cash of $8.2 billion, and EBIT of over $7 billion. If Mastercard were to increase its debt by $1 billion and use the cash for a share repurchase, which ma

> Prokter and Gramble (PKGR) has historically maintained a debt-equity ratio of approximately 0.20. Its current stock price is $50 per share, with 2.5 billion shares outstanding. The firm enjoys very stable demand for its products, and consequently it has

> In year 1, AMC will earn $1600 before interest and taxes. The market expects these earnings to grow at a rate of 3% per year. The firm will make no net investments (i.e., capital expenditures will equal depreciation) or changes to net working capital. As

> Mercurial Company traded its cutting equipment for the newer air-cooled equipment manufactured by Broad Street Corporation. The air-cooled equipment will increase Mercurial’s productivity. The old equipment had a book value of $140,000 (cost of $700,000

> Using Table 17.2 , for each of the following years, state whether dividends were tax disadvantaged or not for individual investors with a one-year investment horizon: a. 1985 b. 1989 c. 1995 d. 1999 e. 2005 f. 2018 data from Table 17.2:

> Suppose B&E Press paid dividends at the end of each year according to the schedule below. It also reduced its share count by repurchasing 5 million shares at the end of each year at the ex-dividend stock prices shown. (Assume perfect capital markets.

> Kohwe Corporation plans to issue equity to raise $50 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10 million each year. Kohwe currently has 5 million shares outstanding, and it has no other a

> Safeco Inc. has no debt, and maintains a policy of holding $10 million in excess cash reserves, invested in risk-free Treasury securities. If Safeco pays a corporate tax rate of 21%, what is the cost of permanently maintaining this $10 million reserve?

> Bay Transport Systems (BTS) currently has $30 million in debt outstanding. In addition to 6.5% interest, it plans to repay 5% of the remaining balance each year. If BTS has a marginal corporate tax rate of 25%, and if the interest tax shields have the sa

> Ten years have passed since Arnell issued $10 million in perpetual interest only debt with a 6% annual coupon, as in Problem 6 . Tax rates have remained the same at 21% but interest rates have dropped, so Arnell’s current cost of debt capital is 4%. a. W

> You have just been hired by Internal Business Machines Corporation (IBM) in their capital budgeting division. Your first assignment is to determine the free cash flows and NPV of a proposed new type of tablet computer similar in size to an iPad but with

> Arnell Industries has just issued $10 million in debt (at par). The firm will pay interest only on this debt. Arnell’s marginal tax rate is expected to be 21% for the foreseeable future. a. Suppose Arnell pays interest of 6% per year on its debt. What is

> Your firm currently has $100 million in debt outstanding with a 10% interest rate. The terms of the loan require the firm to repay $25 million of the balance each year. Suppose that the marginal corporate tax rate is 25%, and that the interest tax shield

> Braxton Enterprises currently has debt outstanding of $35 million and an interest rate of 8%. Braxton plans to reduce its debt by repaying $7 million in principle at the end of each year for the next five years. If Braxton’s marginal corporate tax rate i

> Assume that the Ecara Video Game Company reports under IFRS. Repeat the requirement of E11-31, part (c). Data from E11-31: Prepare the journal entry for Ecara to record the exchange as if the exchange had lacked commercial substance.

> Quartech Enterprises manufactures and distributes thermostats for major kitchen appliances. At the beginning of the current year, Quartech decided to expand its operations by acquiring a metal soldering machine. The machine is to be produced by the manuf

> On December 31, 2018, the Clearwater Corporation acquired a custom-made plant asset by issuing a promissory note with a face value of $750,000, a due date of December 31, 2023, and a stated (coupon) rate of interest of 2%. Interest is compounded annually

> Sonata Manufacturing Corporation decided to expand its operations and open a new facility in Illinois. Rather than constructing a new plant, Sonata negotiated a contract to purchase an existing facility from a former competitor for a total cost of $5,000

> On January 2 of the current year, Vaughn, Inc. acquired land for $2,000,000 to be used to construct a new service and repair center. The closing costs amounted to $110,000, and Vaughn paid $20,000 for the current period’s property taxes. There was an exi

> St. Charles Flooring Company recently purchased a new tile-cutting machine with an invoice price of $215,500. The cost of delivery was $2,000, and installation amounted to $3,550. To test the machine, St. Charles cut 100 tiles that cost $4.50 each. The t

> IFRS. Repeat the requirements in E11-13 assuming that Kurtis Koal Company, Inc. is an IFRS reporter and the mining machine has two components: casing and engine. The amount allocated to the engine is $800,000. The engine has a 6-year useful life and $60,

> Kurtis Koal Company, Inc. purchased a new mining machine at a total cost of $900,000 on the first day of its fiscal year. The firm estimates that the machine has a useful life of 6 years or 6,000,000 tons of coal and a residual value of $60,0

> Your success in business thus far has put you in a position to purchase a home for $500,000 located close to the university you attend. You plan to pay a 20% down payment of $100,000 and borrow the remaining $400,000. You need to decide on a mortgage, an

> IFRS. Avery Air, Plc, a UK company, conducts regularly scheduled maintenance and improvement of its fleet of airplanes. During the year, it replaced engines at a cost of £2,900,000, upgraded airplane interiors at a cost of £610,000, and spent £1,300,000

> Clave Building Products, Inc. conducts regularly scheduled maintenance of its machinery and equipment every Friday afternoon. The cost of maintenance for the current year amounted to $345,000. The regular maintenance revealed the need to conduct a major

> You have been asked to account for a plant asset exchange on the books of the Ecara Video Game Company. On January 1, 2013, Ecara acquired a plastic extruding machine at a cost of $260,000. This machine had an original estimated useful life of 10 years a

> IFRS. Assume that the Yawyag Corporation in E11-8 is an IFRS reporter and complete the following: Required: a. Compute the weighted-average accumulated expenditures for the current year. b. Compute the amount of interest related to the construction p

> Assume that the project in E11-8 was not completed in Year 1. Yawyag was required to make two additional payments to the contractor in Year 2: $900,000 on April 1 and $1,800,000 on August 1 of Year 2. On January 2 of Year 2, Yawyag was required to take o

> Yawyag Corporation engaged Sir Peter, Inc. to design and construct a manufacturing facility. Construction began on January 2 and was completed on December 31 of the current year. The following payments were made to the contractor during the year: To spec

> How would the solution to E11-6 change if Rolling Blackout Power Company was an IFRS reporter and earned $11,000 interest income on investing the excess funds from the construction loan during the year? Prepare the journal entry to record the cash intere

> Rolling Blackout Power Company constructed a new power plant to supply energy to the Northeast Electrical Grid. The construction began on January 2 and ended on December 31 of the current year. On the date of completion, the plant had a total cost of $8,

> Spill Oil Corporation drilled 10 oil wells at the beginning of the current year. The total exploration costs associated with this oil and gas activity amounted to $8,500,000. Only six of the wells were producing; the remaining wells are dry or nonproduct

> Repeat the requirements in E11-40 assuming that FFC uses the successful-efforts method. Data from E11-40: a. Determine the total cost of the natural resource under the full-cost method. b. Prepare the journal entries to record the acquisition of the na

> Ferro Fuel Company (FFC) acquired a tract of land to be used for oil and gas exploration at the beginning of the current year. FFC paid $500,000 to acquire the land, paid $325,000 in development costs, and incurred $130,000 in exploration and evaluation

> You are an intern with First Bank, and have been asked to develop estimates for yield spreads that would be appropriate for corporate bonds or loans with different maturities and credit ratings. To get a rough idea, you decide to start looking at recent

> Assume that Sebastian Company from E11-38 reports under IFRS. Prepare the journal entry to record the exchange on the books of Sebastian Company. Data from E11-38: Brown Company contracts with Sebastian Company to exchange refrigerated trucks. Brown Com

> Assume that Rascals Candy, Inc. reports under IFRS. Repeat the requirement of E11-29, part (c). Data from E11-29: a. Record the journal entry on the books of Temptations Corporation to record the exchange assuming that the transaction altered the economi

> On January 2, 2018, Temptations Corporation paid $31,500 in cash and exchanged a chocolate mixing machine, which had a fair value of $437,500 and a book value of $500,000 ($1,135,000 historical cost − $635,000 accumulated depreciation brought up to the d

> Alto Devices acquires Medifast, a small start-up company, by paying $2,170,000 in cash on January 2. Following are the book values and fair values of Medifast on the date of acquisition. Required: a. What is the amount of goodwill acquired? b. What in

> IFRS. Repeat the requirements in E11-26 assuming that Carlson reports under IFRS. Assume that all the conditions to capitalize development costs have been met and the project is completed on January 1. Capitalized development costs are amortized over 4 y

> During the current year, Carlson Industries, Inc. conducted significant research activities related to the development of a new computer chip. Carlson had the following costs Prepare all journal entries required to record Carlson’s R&am

> On January 2, 2019, Bubba and Company paid $5,000,000 in cash to acquire 100% of the Cire Company’s voting common stock. Cire’s balance sheet on that date showed the following balances in its accounts: The appraised v

> IFRS. Use the information in E11-14, part (a) to prepare the required footnote disclosure under IFRS for Kurtis Koal Company, Inc.’s property, plant, and equipment for Years 1 and 2, including a statement of its accounting policy and a table with account

> Use the information in E11-13, part (a) to prepare the required footnote disclosure for Kurtis Koal Company, Inc.’s property, plant, and equipment for Years 1 and 2, including a statement of its accounting policy and a table with accou

> The Aries Group sold one of its plant assets on April 1 of the current year for $250,000. The asset had an original cost of $500,000 and an estimated residual value of $80,000. Aries used the straight-line method of depreciation assuming an estimated use

> The Gemini Group sold one of its plant assets on August 1 of the current year for $200,000. The asset had an original cost of $500,000 and an estimated residual value of $80,000. The firm used the straight-line method of depreciation assuming an estimate

> IFRS. Repeat the requirements in E11-18 assuming that Ace acquired the asset on July 14 of the current year. Use partial-year depreciation assuming that the manufacturing equipment was acquired at the beginning of the month to simplify the computation.

> You have been hired by a well-funded hedge fund to assess whether there are any arbitrage opportunities created by differences in prices in bitcoin across different markets. For the purposes of this exercise, you may ignore transaction costs by using the

> Repeat the requirements in E11-17 assuming that Ace acquired the asset on July 14 of the current year. Use partial-year depreciation assuming that the manufacturing equipment was acquired at the beginning of the month to simplify the computation.

> Repeat the requirements in E11-17 assuming that Ace is an IFRS reporter and the manufacturing equipment has two components: computer controls and engine. The amount allocated to the computer controls is $500,000. The computer controls have a 5-year usefu

> Ace Manufacturing, Inc. purchased a new piece of manufacturing equipment at a total acquisition cost of $3,000,000 on January 4 of the current year. The firm estimates that the equipment has a useful life of 10 years or 13,250,000 units of output and a r

> Repeat the requirements in E11-14 assuming that Kurtis Koal Company, Inc. acquired the asset on August 1 of the current year. Use partial-year depreciation without adopting any of the acceptable conventions that simplify the computation Data from E11-14