QUESTION At year-end 2008, total assets for Ambrose Inc. were $1.2 million and accounts payable were $375,000. Sales, which in 2008 were $2.5 million, are expected to increase by 25% in 2009. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same […]
QUESTION Answer the following questions:a. Assuming a rate of 10% annually, find the FV of $1,000 after 5 years.b. What is the investments FV at rates of 0%, 5%, and 20% after 0, 1, 2, 3, 4, and 5 years?c. Find the PV of $1,000 due in 5 years if the discount rate is 10%.d. […]
QUESTION At December 31, 2011, Marquis Corporation had 100,000 shares of common stock issued and outstanding, 60,000 of which had been issued and outstanding throughout the year and 40,000 of which had been issued on October 1, 2011. Income before income taxes for the year ended December 31, 2011, was $636,400. In 2011 and 2012, […]
QUESTION All are true/false except 8 and 9[1] An option is a contract that gives its holder the right to buy or sell an asset at a predetermined price within a specified period of time.[2] The exercise value is the positive difference between the current price of the stock and the strike price. The exercise […]
QUESTION Sandwich State Bank has followed the practice of capitalizing certain marketing costs and amortizing these costs over their expected life. In the current year, the bank determined that the future benefits from these costs were doubtful. Consequently, the bank adopted the policy of expensing these costs as incurred. How should the bank report this […]
QUESTION ?oThe cost of capital always depends on the risk of the project being evaluated. Therefore the company cost of capital is useless.?? Do you agree? ting the company cost of capital for the risk complexion of the projects and their capital structure. The projects that have the same risk complexion as the current projects […]
QUESTION Nancy Castle Company purchased a computer system for $60,000 on January 1, 2006. It was depreciated based on a 7-year life and an $18,000 salvage value. On January 1, 2008, Castle revised these estimates to a total useful life of 4 years and a salvage value of $10,000. Prepare Castles entry to record 2008 […]
QUESTION You buy 100 shares of Tidepool Co. for $40 each and 200 shares of Madfish, Inc., for $15 each. What are the weights in your portfolio? Calculation of portfolio weights Number of shares of Tidepool Co. = 100 Price of a share of Tidepool Co.= $40 Value of the shares in Tidepool Co.= $40*100 […]
QUESTION Dektronik Corporation manufactures electrical test equipment. The companys board of directors authorized a bond issue on January 1, 2009, with the following terms:Maturity (par) value: $800,000Interest: 8 percent per annum payable each December 31.Maturity date: December 31, 2013.Effective-interest rate when sold: 12 percent.Required:1. Compute the bond issue price. Explain why both the stated and […]
QUESTION What is the sign of the risk premium of a negative-beta stock? Explain. (Assume the risk premium of the market portfolio is positive.) CAPM equation: E(ra)=Rf (E(rm)-Rf)a Where: E(ra) = Expected return on stock a Rf = Risk free rate of return E(rm) = Expected return on the market portfolio a = Beta of […]
