What are the different inventory types? How do the types differ? Why are some types said to have dependent demand whereas other types are said to have independent demand?
> Consider the following two situations. Although they are similar, their treatments are exactly opposite. Identify the concept underlying both treatments, and explain why the concept treats the two situations differently. a. Sam is an employee of Dunbar
> Determine whether the taxpayer in each of the following situations has a claim of right to the income received: a. Sulley's Spa Spot sells hot tubs that have a 2-year warranty. The warranty provides for the replacement of all parts and the cost of labor
> The estate tax is a tax on the value of property transferred at death. Why is payment of the estate tax not a common event?
> Milton is an inventor who has also written several successful mystery novels. Because he didn't really need the income from the novels, Milton wrote them under an assumed name and had the royalties paid to Hammer Corporation. When Milton incorporated Ham
> Henrietta is the president and sole shareholder of Clutter Corporation. In 2014, Henrietta transferred ownership of her personal residence to the corporation. As part of the transfer, Clutter Corporation assumed Henrietta's mortgage on the house. At t
> Junior bought some stock several years ago for $8,000. He is thinking of selling and has 2 offers. His broker told him he could sell the stock for $8,300 and would have to pay a $600 commission, for a net realization of $7,700. His sister Bonnie offer
> Kimberly Cerny is a graduate student. She is 22 years old and works part-time as a graduate assistant in the biology department. She had health insurance for the full year under her parents’ insurance. In the summer, Kimberly was an i
> Under a reimbursement plan that has been in effect for 5 years, Simmons Corporation advances travel expenses to its sales employees. The advances are deducted from the employees' commissions as they are earned. The employees have an unconditional oblig
> The assignment of income doctrine states that income is taxed to the entity owning the income, regardless of who actually receives the income. That is, income taxation cannot be escaped by assigning the payment of income to another entity. Find the cou
> Many legislative, administrative, and judicial resources are available on the Internet. They can be located using a search engine provided by your browser or a tax directory site located on the Internet. The purpose of this assignment is to practice se
> Many legislative, administrative, and judicial resources are available on the Internet. They can be located using search engines provided by your browser or a tax directory site located on the Internet. The purpose of this assignment is to practice sea
> Use the RIA Checkpoint research database to answer the following questions. Cut and paste the relevant Internal Revenue Code and Treasury Regulation section(s) into your solution and explain how the authority answers the tax issue in question. Give the
> Use the RIA Checkpoint research database to answer the following questions. Cut and paste the relevant Internal Revenue Code and Treasury Regulation section(s) into your solution and explain how the authority answers the tax issue in question. Give the
> The gift tax is supposed to tax the transfer of wealth from one taxpayer to another. However, the payment of gift tax on a transfer of property is relatively rare. Why is gift tax not paid on most gifts?
> Doris purchases a ski cabin in Montana during the current year. She hires a real estate management company to rent out the cabin on a daily basis. The real estate management company tells Doris to expect an average of 70 rental days per year. Doris in
> Arnold is a college professor specializing in robotics. During the current year, he attends a meeting on robotics in San Diego. Because of the desirable location of the meeting, he takes along his wife, Hortense, and their 2 children. The meeting last
> Aretha is an executive vice president of Franklin, Inc. On December 18, 2017, the Franklin, Inc., board of directors awards her a $20,000 bonus. Aretha asks Franklin's controller to delay processing the bonus check until January. The controller agrees
> Ayah signs a contract to write a book for East Publishing Company in the current year. Under its terms, she receives a $5,000 advance against future royalty payments upon signing the contract. The contract provides that if Ayah does not write a suitabl
> The Perry Development Partnership purchases 40 acres of land for $30,000. It spends $8,000 subdividing the land into 2-acre parcels and $17,000 to install a sewer line and utilities to each parcel. Perry intends to sell the 2-acre parcels for $12,000,
> Jerry and his wife, Joanie, own a successful concrete company that is organized as a corporation. Jerry spends all his time running the company, whereas Joanie has a full-time job as a legal secretary. The corporation pays Joanie a salary of $45,000 a
> You are a CPA who has been preparing tax returns for Sign, Seal, and Deliver, a mid-size CPA Firm for the last 5 years. During the current year, you are assigned the individual return of a new client, Guadalupe Piaz. Guadalupe has completed and returne
> Chapter 1 discussed how gross income is equal to all income received, less exclusions. Which concepts form the basis for this calculation of gross income? Explain.
> Why is the pay-as-you-go concept important to the successful operation of the income tax system? What other types of taxes are based on this concept?
> Explain how the related party construct and the arm's-length transaction concept interact.
> Why is a tax on real property used more often than a tax on personal property?
> a. What is a value-added tax and how does it work? b. Evaluate the rate structures of the two proposed taxes. Are they proportional, progressive, or regressive? c. What, if anything, is wrong with Tom's and/or Joe's point of view? Be sure to explain th
> True or false: The most important characteristic in determining the expected return of a well-diversified portfolio is the variance of the individual assets in the portfolio. Explain.
> In recent years, it has been common for companies to experience significant stock price changes in reaction to announcements of massive layoffs. Critics charge that such events encourage companies to fire longtime employees and that Wall Street is cheeri
> If a market is semi strong form efficient, is it also weak form efficient? Explain.
> As a shareholder of a firm that is contemplating a new project, would you be more concerned with the accounting break-even point, the cash break-even point, or the financial break-even point? Why?
> Airlines offer an example of an industry in which the degree of operating leverage is fairly high. Why?
> At one time at least, many Japanese companies had a “no-layoff” policy (for that matter, so did IBM). What are the implications of such a policy for the degree of operating leverage a company faces?
> A coworker claims that looking at all this marginal this and incremental that is just a bunch of nonsense, saying, “Listen, if our average revenue doesn’t exceed our average cost, then we will have a negative cash flow, and we will go broke!” How do you
> As indicated by a number of examples in this chapter, earnings announcements by companies are closely followed by, and frequently result in, share price revisions. Two issues should come to mind. First, earnings announcements concern past periods. If the
> What is the essential difference between sensitivity analysis and scenario analysis?
> What is forecasting risk? In general, would the degree of forecasting risk be greater for a new product or a cost-cutting proposal? Why?
> Joey Moss, a recent finance graduate, has just begun his job with the investment firm of Covili and Wyatt. Paul Covili, one of the firm’s founders, has been talking to Joey about the firm’s investment portfolio. As with any investment, Paul is concerned
> Mark Sexton and Todd Story have been discussing the future of S&S Air. The company has been experiencing fast growth, and the two see only clear skies in the company’s future. However, the fast growth can no longer be funded by internal sources, so Mark
> We have seen that over long periods, stock investments have tended to substantially outperform bond investments. However, it is common to observe investors with long horizons holding entirely bonds. Are such investors irrational?
> Mark Sexton and Todd Story, the owners of S&S Air, have been in discussions with a light aircraft dealer in Monaco about selling the company’s planes in Europe. Jarek Jachowicz, the dealer, wants to add S&S Air to his current retail line. Jarek has told
> You recently graduated from college, and your job search led you to S&S Air. Because you felt the company’s business was taking off, you accepted a job offer. The first day on the job, while you are finishing your employment paperwo
> Sterling Wyatt, the president of Howlett Industries, has been exploring ways of improving the company’s fi nancial performance. Howlett manufactures and sells office equipment to retailers. The company’s growth has bee
> Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to be 2 percent in the coming year, as compared to 5 percent for the past year. Will security prices increase, decrease, or stay the same fo
> Webb Corporation was founded 20 years ago by its president, Bryan Webb. The company originally began as a mail-order company, but has grown rapidly in recent years, in large part due to its Web site. Because of the wide geographical dispersion of the com
> Shelley Couts, the owner of Conch Republic Electronics, had received the capital budgeting analysis from Jay McCanless for the new PDA the company is considering. Shelley was pleased with the results, but she still had concerns about the new PDA. Conch R
> Are the following statements true or false? Explain why. a. If the general price index in Great Britain rises faster than that in the United States, we would expect the pound to appreciate relative to the dollar. b. Suppose you are a German machine tool
> Suppose the exchange rate for the Swiss franc is quoted as SF 1.50 in the spot market and SF 1.53 in the 90-day forward market. a. Is the dollar selling at a premium or a discount relative to the franc? b. Does the financial market expect the franc to s
> Given that Nova star Financial was down by almost 97 percent for 2007, why did some investors hold the stock? Why didn’t they sell out before the price declined so sharply?
> Going all the way back to Chapter 1, recall that we saw that partnerships and proprietorships can face difficulties when it comes to raising capital. In the context of this chapter, the implication is that small businesses will generally face what proble
> Consider the following information about two alternative credit strategies: The higher cost per unit reflects the expense associated with credit orders, and the higher price per unit reflects the existence of a cash discount. The credit period will be
> Airline announced that it would stretch out its bill payments to 45 days from 30 days. The reason given was that the company wanted to “control costs and optimize cash flow.” The increased payables period will be in effect for all of the company’s 4,000
> In the aggregate, debt offerings are much more common than equity offerings and typically much larger as well. Why?
> For initial public offerings of common stock, 2007 was a relatively slow year, with about $35.2 billion raised by the process. Relatively few of the 160 firms involved paid cash dividends. Why do you think that most chose not to pay cash dividends?
> You have recently been hired by Piepkorn Manufacturing to work in the newly established treasury department. Piepkorn Manufacturing is a small company that produces cardboard boxes in a variety of sizes for different purchasers. Gary Piepkorn, the owner
> The DRK Corporation has recently developed a dividend reinvestment plan, or DRIP. The plan allows investors to reinvest cash dividends automatically in DRK in exchange for new shares of stock. Over time, investors in DRK will be able to build their holdi
> As mentioned in the text, Continental Airlines fi led for bankruptcy, at least in part, as a means of reducing labor costs. Whether this move was ethical, or proper, was hotly debated. Give both sides of the argument.
> Several celebrated investors and stock pickers frequently mentioned in the financial press have recorded huge returns on their investments over the past two decades. Is the success of these particular investors an invalidation of the EMH? Explain.
> How are soft rationing and hard rationing different? What are the implications if a firm is experiencing soft rationing? Hard rationing?
> Explain what is meant by business risk and financial risk. Suppose Firm A has greater business risk than Firm B. Is it true that Firm A also has a higher cost of equity capital? Explain.
> Given that First Solar was up by over 796 percent for 2007, why didn’t all investors hold this stock?
> Which of the following most accurately describes a Yankee bond? a. A bond issued by General Motors in Japan with the interest payable in U.S. dollars. b. A bond issued by General Motors in Japan with the interest payable in yen. c. A bond issued by Toyo
> Suppose a firm has a book balance of $2 million. At the automatic teller machine (ATM), the cash manager finds out that the bank balance is $2.5 million. What is the situation here? If this is an ongoing situation, what ethical dilemma arises?
> In the chapter opening, we discussed the enormous cash positions of several companies. Why would firms such as these hold such large quantities of cash?
> It is sometimes argued that excess cash held by a firm can aggravate agency problems (discussed in Chapter 1) and, more generally, reduce incentives for shareholder wealth maximization. How would you frame the issue here?
> Loftis Manufacturing, Inc., has recently installed a just-in-time (JIT) inventory system. Describe the effect this is likely to have on the company’s carrying costs, shortage costs, and operating cycle.
> Electronic Timing, Inc. (ETI), is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. ETI manufactures integrated circuits to capitalize on the complex mixed-signal design technology and has recently entered the mar
> Historically, the U.S. tax code treated dividend payments made to shareholders as ordinary income. Thus, dividends were taxed at the investor’s marginal tax rate, which was as high as 38.6 percent in 2002. Capital gains were taxed at a capital gains tax
> Refer to the observed capital structures given in Table 16.7 of the text. What do you notice about the types of industries with respect to their average debt–equity ratios? Are certain types of industries more likely to be highly levera
> If increases in dividends tend to be followed by (immediate) increases in share prices, how can it be said that dividend policy is irrelevant?
> What are the implications of the efficient markets hypothesis for investors who buy and sell stocks in an attempt to “beat the market”?
> Some corporations, like one British company that offers its large shareholders free crematorium use, pay dividends in kind (that is, offer their services to shareholders at below-market cost). Should mutual funds invest in stocks that pay these dividends
> Why are the costs of selling equity so much larger than the costs of selling debt?
> On Tuesday, December 8, Hometown Power Co.’s board of directors declares a dividend of 75 cents per share payable on Wednesday, January 17, to shareholders of record as of Wednesday, January 3. When is the exdividend date? If a shareholder buys stock bef
> What is the impact of a stock repurchase on a company’s debt ratio? Does this suggest another use for excess cash?
> Historically, the U.S. tax code treated dividend payments made to shareholders as ordinary income. Thus, dividends were taxed at the investor’s marginal tax rate, which was as high as 38.6 percent in 2002. Capital gains were taxed at a capital gains tax
> How is it possible that dividends are so important, but at the same time, dividend policy is irrelevant?
> For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that (1) the market is not weak form efficient, (2) the market is weak form but not semi strong form efficient, (3)
> In 1980, a certain assistant professor of finance bought 12 initial public offerings of common stock. He held each of these for approximately one month and then sold. The investment rule he followed was to submit a purchase order for every firm commitmen
> Ren-Stimpy International is planning to raise fresh equity capital by selling a large new issue of common stock. Ren-Stimpy is currently a publicly traded corporation, and it is trying to choose between an underwritten cash offer and a rights offering (n
> Indicate whether the following events might cause stocks in general to change price, and whether they might cause Big Widget Corp.’s stock to change price: a. The government announces that inflation unexpectedly jumped by 2 percent last month. b. Big Wi
> Eye tech Pharmaceuticals, Inc., a company that develops treatments for eye problems, went public in January 2004. Assisted by the investment bank Merrill Lynch, Eye tech sold 6.5 million shares at $21 each, thereby raising a total of $136.5 million. At t
> Eye tech Pharmaceuticals, Inc., a company that develops treatments for eye problems, went public in January 2004. Assisted by the investment bank Merrill Lynch, Eye tech sold 6.5 million shares at $21 each, thereby raising a total of $136.5 million. At t
> Eye tech Pharmaceuticals, Inc., a company that develops treatments for eye problems, went public in January 2004. Assisted by the investment bank Merrill Lynch, Eye tech sold 6.5 million shares at $21 each, thereby raising a total of $136.5 million. At t
> Why is underpricing not a great concern with bond offerings?
> What are the advantages of using the DCF model for determining the cost of equity capital? What are the disadvantages? What specific piece of information do you need to fi nd the cost of equity using this model? What are some of the ways in which you cou
> Why do noninvestment-grade bonds have much higher direct costs than investment-grade issues?
> Why do we use an after tax figure for cost of debt but not for cost of equity?
> Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 y
> In calculating the WACC, if you had to use book values for either debt or equity, which would you choose? Why?
> On the most basic level, if a firm’s WACC is 12 percent, what does this mean?
> Quality control leads to fewer defective products and fewer lawsuits. Consequently, managers know that quality control is important to their company’s long-term financial health. At the same time, the more quality control managers impose on their organiz
> Could U.S. companies that sold Chinese drywall to consumers also be held liable for damages? Why or why not?
> All liability suits against tobacco companies for causing lung cancer should be thrown out of court now and forever.
> The Russ College of Engineering and Technology of Ohio University announced in a press conference that it had found “rampant and flagrant plagiarism” in the theses of mechanical engineering graduate students. Faculty singled out for “ignoring their ethic
> Could Verost succeed in an action against Nuttall alleging that the company’s failure to maintain the forklift in a safe condition constituted negligence? Discuss.
> By what means did the plaintiff most likely discover the defendant’s studies of an alternative design for the door-latch system?
> If the public wants to change the policy outlined in this case, which branch of the government—and at what level—should be lobbied to make the change? Explain.
> What is discovery, and how does electronic discovery differ from traditional discovery?
> What is judicial review? How and when was the power of judicial review established?
> Each time a state legislature enacts a law that applies the assumption of risk doctrine to a particular sport, participants in that sport suffer.
