QUESTION WESTERN MONEY MANAGEMENT INC.BOND VALUATION Robert Black and Carol Alvarez are vice presidents of Western Money Management and codirectors of the companys pension fund management division. A major new client, the California League of Cities, has requested that Western present an investment seminar to the mayors of the represented cities. Black and Alvarez, who […]
QUESTION Understanding the Terms of a Forward ContractThe company is a golf course developer that constructs approximately 10 courses per year. Next year the company will buy 10,000 trees to install in the courses it builds. In recent years, the price of trees has fluctuated wildly. To eliminate this uncertainty, the company has found a […]
QUESTION REQUIRED ANNUITY PAYMENTS A father is now planning a savings program to put his daughter through college. She is 13, she plans to enroll at the university in 5 years, and she should graduate in 4 years. Currently, the annual cost (for everythingfood, clothing, tuition, books, transportation, and so forth) is $15,000, but these […]
QUESTION Accounting for a Non-Interest-Bearing NoteZobell Corporation sells equipment with a book value of $8,000, receiving a non interest bearing note due in three years with a face amount of $10,000. There is no established market value for the equipment. The interest rate on similar obligations is estimated at 12%. Compute the gain or loss […]
QUESTION LOAN AMORTIZATION Jan sold her house on December 31 and took a $10,000 mortgage as part of the payment. The 10-year mortgage has a 10% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of […]
QUESTION An analysis of the accounts receivable balance of $8,702 on the records of Jorgenson, Inc., on December 31 reveals the following:Accounts from sales of last 3 months(appear to be fully collectible)$7,460Accounts from sales prior to October 11,312(of doubtful value) 320Accounts known to be worthlessDishonored notes charged back to customers accounts800Credit balances in customers accounts1,190(a) […]
QUESTION If a companys board of directors wants management to maximize shareholder wealth, should the CEOs compensation be set as a fixed dollar amount, or should the compensation depend on how well the firm performs? If it is to be based on performance, how should performance be measured? Would it be easier to measure performance […]
QUESTION On June 10, Lipizzaner Crab Shack purchased $6,000 of merchandise from Bristol Company FOB shipping point, terms 2/10, n/30. Lipizzaner pays the freight costs of $400 on June 11. Damaged goods totaling $300 are returned to Bristol for credit on June 12. The scrap value of these goods is $150. On June 19, Lipizzaner […]
QUESTION Your investment portfolio consists of $15,000 invested in only one stock-Microsoft. Suppose the risk-free rate is 5%, Microsoft stock has an expected return of 12% and a volatility of 40%, and the market portfolio has an expected return of 10% and a volatility of 18%.Under the CAPM assumptions,a. What alternative investment has the lowest […]
QUESTION For Neo Understanding break-even relationships. Easy writer manufactures an erasable ballpoint pen, which sells for $1.75 per unt. Management recently finished analyzing th results of he companys operations for the current month. At a break-even point of 40,000 units, the companys total variable costs are $50,000 and its total fixed costs amount to $20,000. […]
