...MINI CASE #1 Issue Identified How to account for the expected loss resulted from redemption of the debt obligations in the period that it announces its intent to call the debt for redemption? ASC References ASC 470-50-40-2 states that “ a difference between the reacquisition price of debt and the net carrying amount of the extinguished debt shall be recognized currently in income of the period of extinguishment as losses or gains and identified as a separate item.Gains and losses shall not be amortized to future periods. “ ASC 405-20-40 states that “a debtor shall derecognize a liability if and only if it has been extinguished. A liability has been extinguished if either of the following conditions is met: The debtor pays the creditor and is relieved of its obligation for the liability. Paying the creditor includes the following: Delivery of cash Delivery of other financial assets Delivery of goods or services Reacquisition by the debtor of its outstanding debt securities whether the securities are cancelled or held as so-called treasury bonds. The debtor is legally released from being the primary obligor under the liability, either judicially or by the creditor. ASC 470-50-55-9 specifies that “the following situations do not result in an extinguishment and would not result in gain or loss recognition under either paragraph 405-20-40-1 or this Subtopic: An announcement of intent by the debtor to call a debt instrument at the first call date In-substance defeasance ...
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...Mini Case BUS 401: Principles of Finance Chapter 11 Mini Case A. Due to flows being an item that the firm obtains and can reinvest, Caledonia should concentrate on cash flows verses accounting profits. When cash flows are being evaluated, the firm’s benefits and costs can be reviewed in a better manner. Since firms are more interested in benefits for the shareholders, they are only interested in the cash flows after-tax. Incremental cash flows are reviewed the most because firms are more concerned with their increased values when the project’s marginal benefits are being evaluated. B. When reviewing cash flow items, depreciation is not one of them. But depreciation to play a role in the differential cash flows of the project because of its effect on taxes. Overall expenses are increased by the expense of depreciation. Depreciation reduces accounting profits which also impacts cash flow by reducing taxes. C. Since firms are more concerned with incremental after-tax cash flows only, sink costs are typically ignored. Regardless of the results in regards to a project, sink costs have happened and are not considered incremental cash flows. J. Because the NPV is greater than zero and the IRR is greater than the rate of return, than the project should be accepted. K. The total project risk, also known as the project standing alone risk, disregards the statistic that the majority of the projects risk will be diversified away as the project...
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...TermPaperWarehouse.com - Free Term Papers, Essays and Research Documents The Research Paper Factory Join Search Browse Saved Papers Search Home Page » Business and Management Mini Case - Mckenzie Corporation's Capital Budgeting In: Business and Management Mini Case - Mckenzie Corporation's Capital Budgeting CFEA3230 Advanced Managerial Finance individual assignment: MINI CASE - McKENZIE CORPORATION'S CAPITAL BUDGETING Prepared by :- RUBBIATUN ARDAWIYAH bt ABDUL HAMID CEA 080147 Prepared for:- Profesor Madya Dr. Rubi Binti Ahmad Date of submission :- 25 april 2012 MINI CASE - McKENZIE CORPORATION'S CAPITAL BUDGETING Sam McKenzie is the founder and CEO of McKenzie Restaurants, Inc., a regional company. Sam is considering opening several new restaurants. Sally Thorton, the company's CFO, has been put in charge of the capital budgeting analysis. She has examined the potential for the company's expansion and determined that the success of the new restaurants will depend critically on the state of the economy next year and over the next few years. McKenzie currently has a bond issue outstanding with a face value of $34 million that is due in one year. Covenants associated with this bond issue prohibit the issuance of any additional debt. This restriction means that the expansion will be entirely financed with equity, at a cost of $8.4 million. Sally has summarized her analysis in the following table, which shows...
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...Mini Case #2 JetBlue: losing the Magic Touch? 1. What type of generic business strategy is JetBlue pursuing: cost leadership, differentiation, or integration? A differentiation strategy seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while keeping cost at the same or similar levels. A cost-leadership strategy, in contrast, seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers. And integration strategy is a combination of differentiation and cost-leadership strategy. In this case, JetBlue is pursuing integration strategy because JetBlue reproduced many of SWA’s cost-reducing activities such as flying point-to-point to directly connect city pairs. It also predominantly uses one type of airplane, the Airbus A320, to lower its maintenance costs. And in addition, it flies longer distances and transports more passengers per flight per than SWA, further driving down its costs. So far, all these strategies have to do with cost-leadership. JetBlue also incorporated the differentiation strategy in their model. They executed the differentiation strategy by offering value-enhancing features include high-end 100-seat Embraer regional jets with regional jets with leather seats, individual TV screen with movies, Live TV, Fox TV, and Direct TV programming, 100 channels of...
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...----- Chapter 5 : Basic Stock Valuation :: MINI CASE------------ C) Assume that temp force has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 7 percent, and that the market risk premium is 5 percent. What is the required rate of return on the firm’s stock? Using SML to calculate temp force’s required rate of return: rs = rRF + (rM – rRF)bTemp Force = 7% + (12% - 7%)(1.2) = 7% + (5%)(1.2) = 7% + 6% = 13%. D) Assume that Temp Force is a constant growth company whose last dividend (D0, which was paid yesterday) was $2.00, and whose dividend is expected to grow indefinitely at a 6 percent rate ? 1) What is the firm’s expected dividend stream over the next 3 years? Temp Force is a constant growth stock, and its dividend is expected to grow at a constant rate of 6 percent per year. Expressed as a time line, we have the following setup. 1 + g = 1.06 To get D1, D2, and D3: rs = 13% 0 1 2 3 4 g = 6% | | | | | D0 = 2.00 2.12 2.247 2.382 1.88 1.76 1.65 . . . 2) What is the firm’s current stock price? We could extend the time line on out forever, find the value of Temp Force’s dividends...
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...As mentioned in the introduction of the mini case, Hobby Horse Company, Inc. (HH) experienced a tough year in 2011. HH opened up a number of new stores but experienced a poor Christmas season. Christmas season is the biggest sale period for retail stores. As a result, bad Christmas sales performance played a big part of HH’s loss for year 2011. As we computed the financial ratios for HH, we can see the effects from new stores openings and poor sales performance. First of all, return on asset (ROA) is a ratio used to measure how efficient a company generates profit using its assets, which is the invested capital. We noticed that HH’s ROA was increasing from 2006 to 2010. However, HH’s ROA for 2011 dropped dramatically from 18.41%(year 2010) to -1.57%. This shows that HH’s assets are not working efficiently enough to cover cost of assets. HH’ managers obviously failed to convert the money from investors into net income. This is not a good sign to the company because it means that the company is running to generate losses but not profits. Same pattern happens with HH’s return on capital(ROC) and return on equity(ROE). Both ROC and ROE were going up in the period of 2006 to 2010, however, in 2011, both dropped to -2.74% and -7.25% respectively. These datas show that HH was not generating profits but losses for every dollar from its investors. In other words, there is something wrong with the way HH’s managers manage business. According to the Du Point System, we know that ROA...
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...Mini Case – Groupon Online coupon businesses have begun to boom recently in not only big cities in the U.S. but also in smaller areas around the country. With the growth of this business, though, comes competition, which is a major problem facing big online businesses such as Groupon and Living Social. Although these are the two largest rivals in the business right now, there are hundreds of other companies that have tried to take a piece of the pie by offering their own online coupons. Companies such as Groupon and Living Social have to find a way to get customers to buy from them, but also to get them to return and not just go to the next best competitor; return customers, which is another major problem those compaies face. Tim O'Shaughnessy, the founder of Living Social has been trying to stay ahead of the curve by making sure he hires in the right people that will not only work with the company’s core values but also live their personal lives through the company’s core values too. By doing this, companies such as Living Social and Groupon can differentiate themselves from the other competitors. For a company to have a winning strategy they must pass three different types of tests; the fit test, the competitive advantage test and the performance test. Living Social has grown to around 200 cities across the U.S. which allows their competitors to rival them in many different areas. The company must take a look at the three winning strategy criteria to make sure that...
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...Getting started with Adobe® Reader® Adobe Reader is the gold standard for reliably viewing PDF documents on Android™ phones and tablets. Let’s take a look at the ways you can use PDF documents with Adobe Reader. Swipe to the next page to get started! ® I have PDF documents saved in my email and bookmarked in my web browser, plus a whole bunch more in other apps. How do I open them with Adobe Reader? Opening PDF documents with Adobe Reader is as simple as tapping your finger. Swipe ahead to see how. Email In your email app, tap the View button next to the attach icon . Easy! SAVE VIEW Tip: Select the Use by Default option to use Adobe Reader for all your PDF documents. Web browser When you open a PDF link in your web browser, it is saved in your Downloads widget. Simply tap the PDF file you want to open. Downloads Here, there, and everywhere If your PDF document is stored in another app, you can often open it by tapping the document icon or filename. My PDF documents are in Adobe Reader. Now what do I do? Tap the middle of the screen once to reveal the toolbars. After a few moments, they disappear until you tap again. How do I get from one page to another? Tap the document icon in the toolbar to change how you view pages. Go with the flow or view one page at a time! In Continuous, swipe up or down on the screen to change pages. In Single Page, swipe left or right to change pages. Or tap the right or left edge. Go ahead, try it now! Continuous Single Page Text...
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...a. Why is corporate finance important to all managers? Answer: Corporate finance is important to all managers because it helps managers decide how to finance an organization . It teaches managers how fix financial problems, evaluate proposals, and determine which projects are financially beneficial to a company and its investors. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. Answer: A company may start off as a proprietorship, than advance to a partnership before forming a corporation below are some advantage and disadvantages of each form: 1. Proprietorship: This type of organization is individually owned and has the following advantage; it is easy and inexpensive to form, its income is not subjected to corporate taxes and it is subjected to few government regulation. Some disadvantages for proprietorship are the owner has unlimited personal liability for the business debts, it is usually difficult for proprietors to obtain capital for growth and the life of the business is limited to the life of its founder. 2. Partnership: This type of organization is formed when two or more individuals or entities come together to conduct a non-corporate business for profit. Partnerships have the same advantages as proprietorships i.e. they are easy and inexpensive to form, income is not subjected to corporate taxes and they are...
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...The amount the company will have available is the future value of the transfers, which are an annuity. The amount of each transfer is one minus the wire transfer cost, times the number of the transfers, which is four since there are four banks located at San Francisco, St. Louis, Atlanta, and Boston, respectively, also times the amount of each transfer. Therefore, the total available in two weeks will be: Amount available = [(1 – 0.12%) × 4 × $175,000] × [(1+0.012%)14 – 1] / 0.012% Amount available = $9,795,878.32 Under the terms outlined by the Third National Bank, the bank will accept the ACH transfers from the four different banks, so the company incurs a transfer fee from each collection center in such a case. The future value of the deposit now will be: Value of ACH = {4 × ($175,000 – $150) × [(1+0.012%)14 – 1] / 0.012%} / (1+0.012%) Value of ACH = $9,798,065.18 Because the future value is higher under the terms outlined by the Third National Bank, the company should go ahead and proceed with it. To find out the cost at which the company is indifferent, we set the amount available we found under the current lockbox system equal to the value of ACH under the Third National Bank, making the cost of the ACH unknown and represented by X, then we have: {4 × ($175,000 – X) × [(1+0.012%)14 – 1] / 0.012%} / (1+0.012%) = $9,795,878.32 X=$189.03 Therefore, if the cost of ACH transfers is $189.03, the company will be indifferent between the two...
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...1. Why should Lael get involved in reporting if she has not experienced any of the allegations the other employees are making? * With this high amount of employee turnover for the overnight shifts, company performance has been decreasing drastically. Employees for the company have bad perceptions of the ethical culture, which causes more employees to leave the company after short periods of time. If employees feel comfortable at their job, they are more likely to work harder, which also increases performance. Everybody wants to be able to trust other employees that work at the company and have the capability to build relationships that are respected at all times. Even though the person engaging in these unethical behaviors was the manager’s son, the actions still need to be reported. If Lael would not do anything about these activities, the company would continue to lose more and more employees with high turnover, possibly leading to that branch being shut down due to low performance. 2. What are some of the characteristics of Best East’s ethical culture that would create the current dilemma for Lael? * Throughout the excerpt, it appears that Best East has an ethical culture that believes that degrading women is acceptable and not reporting these incidents is also not pertinent. Even though the employee handbook clearly states the sexual harassment clause, employees need to stand up for themselves. Even if the perpetrator is the manager’s son, these behaviors...
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...Solutions Guide: Please do not present as your own. I sometimes post solutions that are totally mine, from the book’s solutions manual, or a mix of my work and the books solutions manual. But this is only meant as a solutions guide for you to answer the problem on your own. I recommend doing this with any content you buy online whether from me or from someone else. CASE 13–30 Make or Buy; Utilization of a Constrained Resource [LO1, LO3, LO5] Garrison, Noreen & Brewer. 13th edition Managerial Accounting. Entire case.TufStuff, Inc., sells a wide range of drums, bins, boxes, and other containers that are used in the chemical industry. One of the company’s products is a heavy-duty corrosion-resistant metal drum, called the WVD drum, used to store toxic wastes. Production is constrained by the capacity of an automated welding machine that is used to make precision welds. A total of 2,000 hours of welding time is available annually on the machine. Because each drum requires 0.4 hours of welding time, annual production is limited to 5,000 drums. At present, the welding machine is used exclusively to make the WVD drums. The accounting department has provided the following fi nancial data concerning the WVD drums: ...
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...a. Assuming the expansion was effective Jan. 1, 2010, the 2010 income statement indicates an approximate increase in sales of $2.4M. However, the income statement also indicates a Net Loss in 2010 of ($95K) compared to Net Income of $88K in 2009. Total Assets increased approximately $1.4M. The major drivers causing the increase are fixed assets of $711K, inventory of $572K, and accounts receivable of $280K. Being that assets have to equal liabilities and equity the effect is the same with an approximate increase of $1.4M. Major drivers causing the increase for liabilities and equity are notes payable of $520K and long-term debt of $680K. b. Computron Industries (CI) had to finance the expansion. The financing activities are what kept them cash positive in 2010. In 2011, CI will need to focus on improving cash flow from the operation of the expansion and long term CI will need to manage the return on their investments. c. Free Cash Flow is the Net Operating Profit after Taxes minus net investment in operating capital. The cash flow is used for distribution to investors after all necessary investments are made to sustain operations. It is important to free cash flow now and in the future to increase the value of a company. Free cash flow can be used for paying off debt and interest to debt holders, paying dividends to shareholders, repurchase stock (treasury stock), and buy short-term investments or other non-operating assets. d. Computron’s NOPAT is $10,464...
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...Week 3: Course Project Submitted by: Bainy Ahouangnato MIS 535 Managerial Applications Of Information Technology Professor William Willette Table of Contents 1. Abstract 2. Brief Company background 3. Discussion of business problem(s) 4. High level solution 5. Benefits of solving the problem 6. Business/technical approach 7. Business process changes 8. Conclusions and overall recommendations 9. High-level implementation plan 10. Summary of project ABSTRACT During the last decade, technology has evolved in such a way that it is now present in every aspect of our lives. Technology has made is possible to order many things online from the comfort of our home and have them delivered either directly to our house or to a local store where we can pick them up. Many pharmaceutical stores (Walgreens, CVS, Rite Aid…), food stores (Pizza Hut, Papa Johns, Dominos…) and stores like Home Depot, Lowes and many others have those services available through their website or mobile applications for their customers. The main objective of this research project is to measure the benefits that such a technology could bring to Wawa stores, so that revenues can grow and production costs lowered. One objective is to identify why the technology is needed, another is to implement the technology and at last, analyze the benefits that it could bring to the company. BRIEF COMPANY BACKGROUND “ Wawa, Inc., privately held...
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...City Council Exercise By Mohammad Russel Ranking: 1. Condominium building 2. Parking lot for Saint Stanislaus Church 3. Women center 4. NAFCO, to set up a drug rehabilitation center with residential facilities 5. Gas station by major oil company 6. Friendship house 7. Private club by John Lateck Concluding points: 1. Everyone just ranking the value by their own decision. When we get to know all of our group members ranking value. We are discussing more about this to make it perfect ranking. 2. When group can get to know all member’s individual perspective for their ranking value and then we can note the important ideas and reason to make the final ranking. 3. a. we can analyze the existing situation b. listen and raise question among us c. allow free expression 4. a. All conflicts cannot be resolved b. Make necessary adjustment, reinforce and confirm 5. By value we are taking our decision and individual taking decision are not the same. So there are bunch of decision in the group by the members even though there is a right answer. Questions: 1. What criteria were used by the group, and how were they determined? We ranked the bid list by discussing our own individual ranking among members and then we determine by the most significant value which we agree by all of us. 2. Were individual values and preferences affected at any time during the decision-making process? If so, how? Yes, individual values and preferences affect the time during the decision-making...
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