Jenna Smith recently purchased an annuity contract that will pay her $125,000 per year for the next 7 years. According to Smith’s calculations, the estimated internal rate of return on this investment is 14 percent. If Smith’s cost of capital is 10 percent, what is the estimated NPV of the annuity investment?
> What information is provided in a balance sheet?
> What is a proxy statement, and why is it important to the analyst?
> Why is the management discussion and analysis useful to the financial analyst?
> What causes an auditor’s report to be qualified? adverse? a disclaimer of opinion? Unqualified with explanatory language?
> Explain the importance of the notes to the financial statements.
> Describe the financial statements that are contained in an annual report or Form 10-K.
> How can the allowance for doubtful accounts be used to assess earnings quality?
> What are the particular items an analyst should review and study in an annual report, and what material should be read with caution?
> What is the difference between an annual report and a 10-Kreport?
> What types of questions can be answered by analyzing financial statements?
> The 2013 Intel Form 10-K can be found at the following Web site: www.pearsonhighered .com/fraser. (a) Prepare a summary analysis of the Statements of Cash Flows for all three years. (b) Analyze the Consolidated Statements of Cash Flows for Intel for 2013
> This case is a continuation of Cases 2.4, 3.4, and 4.4. (a) Open the financial statement template that you have saved from the Chapter 4 hydrogenics Case. Click on the “ratios” tab at the bottom of the screen and print out this page. (b) Using all inform
> The following excerpts are from the 2013 Form 10-K of Facebook, Inc11. See Accompanying Notes to Consolidated Financial Statements. See Accompanying Notes to Consolidated Financial Statement Item 1. Business Overview Our mission is to give peopl
> Each chapter in the textbook contains a continuation of this problem. The objective is to learn how to do a comprehensive financial statement analysis in steps as the content of each chapter is learned. Using the 2013 Applied Materials Form 10-K, which c
> The 2013 Intel Annual report can be found at the following Web site: www.pearsonhighered.com/fraser. Using the annual report, answer the following questions: (a) Using the Intel Annual report, calculate key financial ratios for all years presented. (b)
> This case is a continuation of Cases 2.4 and 3.4. (a) Open the financial statement analysis template that you saved from the Chapter 3 hydrogenics Case. Click on the “Cover” tab at the bottom of the screen.
> Avnet is one of the world’s largest value-added distributors of electronic componenets, enterprise computer and storage products, IT services and embedded subsystems. Avnet creates a vital link in the technology supply chain that connec
> Using the 2013 Applied Materials Form 10-K, which can be found at www.pearsonhighered.com/fraser, complete the following requirements: (a) Open the financial statement analysis template that you saved from the Chapter 1 Applied Materials problem and inpu
> This case is a continuation of Case 2.4. (a) Open the financial statement analysis template that you saved from the Chapter 2 hydrogenics Case. Click on the “Cover” tab at the bottom of the screen. Input th
> The following excerpts are from the Logitech International S.A. Form 10-K. Item 1. business Company overview Logitech is a world leader in products that connect people to the digital experiences they care about. Spanning multiple computing, communica
> Using the 2013 Applied Materials Form 10-K, which can be found at www.pearsonhighered.com/fraser, complete the following requirements: (a) Open the financial statement analysis template that you saved from the Chapter 1 Applied Materials problem and inpu
> The 2013 Intel Form 10-K can be found at the following Web site: www.pearsonhighered .com/fraser. (a) Using the consolidated statements of operations, analyze the profitability of Intel by preparing a common-size income statement for the past three years
> The 2013 Intel Form 10-K can be found at the following Web site: www .pearsonhighered.com/fraser. the company’s annual report which includes the letters from the cEO and the chairman can be found at the company’s website: www .intc.com. Using the Form 10
> Andreka Inc. uses the direct method to allocate support department costs to production departments (fabricating and finishing). Information for June 2010 follows. a. What amounts of human resources and administration costs should be assigned to Fabricat
> The manager at Mannie’s Floor Coverings is interested in purchasing a computer and software that would allow company salespeople to demonstrate to customers how a finished carpet installation would appear. The total cost of the computer, software, and pe
> Double K Corp. has established a 12 percent target ROI for 2010 for its Jamestown Division. The following data have been gathered for the division’s operations for 2010: average total assets, $11,200,000; revenues, $30,000,000; and expenses, $28,000,000.
> On April 1, 2010, Topeka Brake Mfg. purchased new computer-based production scheduling software for $480,000. On May 15, 2010, a representative of a computerized manufacturing technology company demonstrated new software that was clearly superior to that
> Data for the three autonomous divisions of Arizona Mining, Inc. for fiscal year 2010 follow. Compute the return on investment for each division. Division 1 Division 2 Division 3 Segment income $ 220,000 $ 350,000 $ 4,500,000 Asset investment 2,500,0
> Monet’s Prints has the following revenue and cost functions: Revenue = $60 per unit Cost =$120,000 $30 per unit a. What is the break-even point in units? b. What is the break-even point in dollars?
> Memphis Jazz Company is preparing a pamphlet that will provide information on the types of jazz, jazz terminology, and biographies of some of the better-known jazz musicians. In addition, the pamphlet will include a request for funding to support the jaz
> The following financial data have been determined from analyzing the records of Tim’s Brake Co. (a one-product firm): Contribution margin per unit ………………………$ 50 Variable cost per unit …………………………………….42 Annual fixed cost ……………………………….$180,000 How does ea
> Macon Farms raises peaches that, at harvest, are separated into three grades: premium, good, and fair. Joint cost is allocated to products based on bushels of output. The $337,500 joint cost for one harvest yielded the following output quantities.
> Portsmouth Port Services creates and maintains shipping channels at various ports around the world. The company is considering the purchase of a $72,000,000 ocean-going dredge that has a 5-year life and no salvage value. The company depreciates assets on
> You have just purchased a new car, making a down payment of $8,000 and financing the balance of the purchase cost on an installment credit plan. According to the credit agreement, you will pay $600 per month for a period of 48 months. If the credit agree
> You have just invested $60,000 in a bank account that guarantees to pay you 6 percent interest, compounded annually. At the end of 5 years, how much money will have accumulated in your investment account? (Ignore taxes.)
> Brenda’s Bees is considering the purchase of new honey processing equipment. The equipment would cost $100,000, have an expected life of 7 years, and save the firm $28,000 annually in maintenance, operating, and cleanup costs. The firm’s cost of capital
> Mosbee Designs uses a job order costing system to account for the various architectural services offered to commercial clients. For each major job, architectural models of the completed structures are built for client presentations. At the completion of
> Renaissance Creations restores antique stained glass windows. All jobs generate some breakage or improper cuts. This scrap can be sold to stained glass hobbyists. Renaissance Creations expects to incur approximately 45,000 direct labor hours during 2010.
> Ramirez Tax Services is considering the installation of a new system for electronically filing tax returns. The system has an initial cost of $80,000 and an expected life of 5 years. a. If the company’s cost of capital is 10 percent, how much annual incr
> Trady’s Tree People manufactures wood statues, which yields sawdust as a by-product. Selling costs associated with the sawdust are $25 per ton sold. The company accounts for sawdust sales by deducting the sawdust’s net realizable value from the major pr
> New York Fabrics makes three clothing items: pants, shorts, and shirts. Contribution margins for the products are $4.25, $4.05, and $2.70 per unit, respectively. The company’s manager must decide what mix of clothes to make. New York Fa
> Lundholm Corp. is considering the purchase of a robotic machine that would replace a manual labor production task. This project would require an upfront cash commitment of $2,000,000 to purchase and install the equipment. The equipment would have an expe
> The variable costs for four different products are $9.30, $7.86, $8.78, and $19.44. State the objective function in equation form to minimize the variable costs.
> The contribution margins for three different products are $19.00, $8.00, and $3.50. State the objective function in equation form to maximize the contribution margin.
> For each of the following limitations of the capital project evaluation methods, indicate to which method, or methods, the limitation applies. Consider all of the following methods: payback, NPV, PI, IRR, and ARR (accounting rate of return). a. Cash flow
> Qvat Division, a subsidiary of Imogene Ltd., manufactures a product with the following costs: Direct material …………………………………..$15.00 Direct labor ………………………………………...26.25 Variable overhead ……………………………….12.75 Fixed overhead …………………………………..18.00 Total ………………
> For each of the following assumptions that underlie the capital project evaluation methods, indicate to which method, or methods, the assumption applies. Consider all of the following methods: payback, NPV, PI, IRR, and ARR (accounting rate of return). a
> Three years ago, Girston Gravel Pit purchased a material conveyor system. The company has decided to sell the system and acquire more advanced technology. Data relating to the existing system follow. Current market value …………………………………………………………..$37,000 O
> Winnovia Mills processes cotton in a joint process that yields two joint products: fabric and yarn. May’s joint cost is $120,000, and thesales values at split-off are $360,000 for fabric and $300,000 for yarn. If the products are processed beyond split-o
> Mountain Mist Inc.’s cost of capital is 11 percent. In 2010, one of the firm’s divisions generated an EVA of $1,130,000. The fair market value of the capital investment in that division was $29,500,000. How much after-tax income was generated by the divi
> Dallas Office Systems has annual sales of $2,250,000 with variable expenses of 60 percent of sales and fixed expenses per month of $25,000. By how much must annual sales increase for Dallas Office Systems to have pre-tax income equal to 30 percent of sal
> Indicate whether a firm exhibiting each of the following characteristics would more likely be centralized (C) or decentralized (D). a. Large number of employees who telecommute b. Slow growth rate c. Few employees d. Subordinates highly trained and mento
> Casper Ceramics is considering the purchase of new production technology that would require an initial investment of $1,500,000 and have an expected life of 10 years. At the end of its life, the equipment would have no salvage value. By installing the ne
> In recent years, stock price averages (such as the Dow Jones Industrial Average) have shown sensitivity to changes in interest rates. Based on your understanding of the factors that determine stock prices and of how future cash flows are discounted, prep
> Kurt’s Office Services is evaluating the purchase of a state-of-the-art desktop publishing system that costs $40,000, has a 6-year life, and has no salvage value at the end of its life. The company’s controller estimates that the system will annually gen
> Use the tables in Appendix A to determine the answers to the following questions. Ignore taxes in all circumstances. a. Titus wishes to have $50,000 in 6 years. He can make an investment today that will earn 8 percent each year, compounded annually. What
> Management of Frisco Films is considering the following capital projects: Assume that all projects have no salvage value and that the firm uses a discount rate of 10 percent. Management has decided that only $25,000,000 can be spent in the current year
> Lastlock Security Systems is considering an investment in computer-based production technology as part of a business reengineering process. The necessary equipment, installation, and training will cost $18,000,000, have a life of 8 years, and generate an
> Maine Trucking provides truck freight services throughout the northeast United States. The firm is considering an investment in a mainframe computer and communications software, which would cost $1,000,000 and have an expected life of 8 years. For tax pu
> Natural Foods is considering the purchase of new food processing technology, which would cost $900,000 and would generate $150,000 in annual cost savings. No salvage is expected on the technology at the end of its 10-year life. The firm’s cost of capital
> Rockport Municipal Marina is considering adding a new dock to accommodate large yachts. The dock would cost $700,000 and would generate $144,000 annually in new cash inflows. Its expected life would be 8 years, and it would have no salvage value. The org
> Nashville Tours is considering adding a new bus route. To do so, the company would be required to purchase a new bus, which would cost $600,000, have a 10-year life, and have no salvage value. If the new bus is purchased, Nashville Tours’ managers expect
> Bill’s Cabinets sells a product for $360 per unit. The company’s variable cost per unit is $60 for direct material, $50 per unit for direct labor, and $34 per unit for overhead. Annual fixed production overhead is $74,800, and fixed selling and administr
> In discussing your cost accounting class with friends, you explained that you were currently studying methods of evaluating capital investments. You mentioned that most of these methods rely upon cash flow analysis. One particularly sophisticated friend
> The following 2010 information is available for Cornwall Industries: average assets invested, $7,200,000; revenues, $26,400,000; and expenses, $24,600,000. a. Calculate return on investment. b. Calculate profit margin. c. Calculate asset turnover. d. Usi
> For the most recent fiscal year, the Northern Division of Eastern Corporation generated an asset turnover ratio of 4 and a profit margin (as measured by the segment margin) ratio of 4 percent on sales of $4,000,000. a. Compute the average assets employed
> The company president has asked you, as the new controller, to comment on any deficiencies of the firm. After saying you believe that the firm needs long-run performance measurements, the president says that the long run is really just a series of short
> In recent years, salaries for chief financial officers (CFOs) of large U.S. corporations averaged only about 20 percent of the total CFO compensation package; the other 80 percent is performance-based, variable compensation that includes mostly stock opt
> Jeannie South is a division manager of Montana Manufacturing Inc. She is in the process of evaluating a $4,000,000 investment. The following net annual increases, before depreciation, in divisional income are expected during the investment’s five-year li
> Following is a list of transactions that affected one division within a multiple-division company. Indicate, for the current fiscal year, whether each transaction would increase (I), decrease (D), have no effect (N), or have an indeterminate (?) effect o
> EVA is used by top management at College Learning Technologies to measure and evaluate the performance of segment managers. The company’s cost of capital is 11 percent. In 2010, its Audio/Visual subsidiary generated after-tax income of $2,260,000, with $
> Schulz GmbH, a German company, set an 18 percent target rate of return for its U.S. division for 2010. For 2010, the U.S. division generated $39,000,000 of revenue on average assets of $25,000,000. The division’s variable costs were 45 percent of sales,
> London Ltd. operates its two divisions as investment centers. Information about these divisions follows. a. What is the residual income of each division if the “charge” on invested assets is 13 percent? Which division
> Sheridan Shacks makes portable garden sheds that sell for $1,800 each. Costs are as follows: a. How many garden sheds must the company sell to break even? b. If Sheridan Shacks’ management wants to earn a pre-tax profit of $200,000, ho
> Theta Property Management provides management services for commercial real estate development projects. The firm recently started a new division to market video game services to existing clients. The new division will purchase and maintain the video equi
> You have asked your sales manager to explain why budgeted revenues for your division are below expectations. The budget indicated $472,500 of revenues based on a sales volume of 630,000 units. Sales records indicate that 645,000 product units were actual
> For 2010, Wagner Company planned to sell 460,000 units at a $37 selling price. In early 2011, the marketing manager was asked to explain why budgeted revenue had not been achieved. Investigation revealed the following information: Actual sales volume ………
> Multiple-doctor medical practices are often structured with each doctor acting as a profit center. a. Discuss why such an organizational structure would be useful. b. Go to the Web and find some software packages that could be used to account for such an
> For each of the following organizational units, indicate whether the unit would most likely be classified as a cost center (C), a revenue center (R), a profit center (P), or an investment center (I): a. Laundry of a large bed-and-breakfast b. Corporate-o
> Many companies are trying to determine the best organizational structure for information technology (IT) operations. Although IT operations had been decentralized in the past, there has been a growing trend to bring such operations back to a central loca
> Use the Internet to identify a multinational company encountering tax problems related to transfer pricing between its organizational units in different countries. Prepare a brief discussion of the issues and the actual or potential consequences.
> Walsdorf Company’s information technology department is developing a support department transfer price based on minutes of computer time. For 2010, its expected capacity was 700,000 minutes, and theoretical capacity was 1,000,000 minutes. Costs of the IT
> Great Taste Food Stores operates 20 large supermarkets in the East. Each store is evaluated as a profit center, and store managers have complete control over their purchases and inventory policy. Company policy is that transfers between stores will be ma
> Peyvandi Co., a profit center of California Enterprises, manufactures Product BP3751-9S to sell internally to other company divisions as well as externally. One unit of Product BP3751-9S sells for $72. Production and selling costs for a unit of Product B
> Prior to the 2009 Super Bowl, a Phoenixarea retailer ordered 50,000 T-shirts that read: Arizona Cardinals—2009 Super Bowl Champs. The company paid $11.75 for each of the custom T-shirts. Following the loss of Arizona to the Pittsburgh Steelers, the retai
> Elba Division of Haimes Industries manufactures product #54B89. Three-fourths of the production is transferred to the Crete Division of Haimes Industries; the remainder is sold externally for $67 per unit. The following information is available about pro
> Leander Mfg. has three support departments (human resources, administration, and maintenance) and two revenue-generating departments (assembly and finishing). The company uses the step method to allocate support department costs to operating departments.
> Francis Mendez delivers two-day statistical process control seminars for manufacturing workers. For each program, a $4,200 fee is normally paid. In 2009, Mendez presented 30 seminars, and he budgeted a 30 percent increase in seminars for 2010. At the end
> Prepare an oral presentation discussing how accounting information can (a) help and (b) hinder an organization’s progress toward its mission and objectives. Be sure to differentiate between the effects of what you perceive as “traditional” versus “nontra
> Many firms now engage in some form of B2B (business-to-business) Internet-based commerce. A specific type is B2B buy-side, which is Internet technology that allows firms to solicit bids on inputs that firms require to support production, sales, and admin
> Write a paper that compares and contrasts the corporate, general partnership, limited partnership, LLP, and LLC forms of business. At a minimum, discuss issues related to formation, capital generation, managerial authority and responsibility, taxation, o
> Following are descriptions of three businesses. For each, assume that you are the CEO. Identify the most critical information you would need to manage the strategic decisions of that business. a. Private hospital that competes on the basis of delivering
> As a financial analyst, you have just been handed the 2010 financial report of Firm A, a large, global pharmaceutical company. Firm A competes in both traditional pharmaceutical products and in evolving biotechnology products. The following data (in bill
> Following are activities that are components of a management control system in a production department. For each item listed, discuss whether it is a detector, assessor, effector, or communications network: a. Comparing actual costs to budgeted costs and
> Star International manufactures after-market parts for lawn mowers and recreational all-terrain vehicles (ATVs). Because of the growth in the ATV market, sales of Star International’s products have grown at double digit rates over the past five years and
> Pittsburg Tar Co. had the following income statement for 2010: a. Compute the break-even point using the equation approach. b. Prepare a CVP graph to reflect the relationships among cost, revenue, profit, and volume. c. Prepare a profit-volume graph. d.
> Susan Cheng is the CFO of Automotive Solutions, a small company that makes specialized lighting equipment for the car industry. Because of intensified competition from foreign companies, Automotive Solutions has experienced extreme price pressure for its
> The use of stock options to compensate executives has become much more common in recent years. The increased use of options to compensate executives is based on efforts of boards of directors to align the interests of managers and stockholders. Prior to
> In recent years, many firms have been forced to restate the earnings that they previously reported in their public financial reports. A number of these restatements have been linked to attempts by top management to manipulate the reported accounting info
> A few years after graduation, Ibrahim and four of his friends from college organized an engineering consulting business called 5Q. All five individuals had earned degrees in engineering fields and were anxious to pool their expertise and work together in
