Randy ’s Rowboats Ltd. purchased and began to use its first six rowboats for a total cost of $2,400. Randy believes the boats can be used for four years, providing the company with equal value each year. After four years, the boats will be worthless. a. Use your best judgement to determine a reasonable amount to charge to amortization expense each year. b. Find the book value (cost less amortization) of the boats for each of the four years they will be used. c. If the company expects to sell the rowboats for $400 after four years, determine the reasonable amount to charge to amortization expense each year.
> You own a sporting goods store and offer personalization services. You are planning a complete renovation of the accessories department. What decisions must you make?
> Talk to two local retailers and ask them what they have done to maximize their energy efficiency. Present your findings.
> Comment on this statement: “The quality of store maintenance efforts affects consumer perceptions of the retailer, the life span of facilities, and operating expenses.”
> Why challenges do omnichannel retailers face in job standardization and cross-training for its employees?
> What are the pros and cons of prototype stores? For which kind of firm is this type of store most desirable?
> Under what circumstances should a disguised audit be used?
> Present a brief operations blueprint for your college bookstore.
> What do you think are the risks of placing too much reliance on merchandising software? Do the risks outweigh the benefits? Explain your answer.
> What is the basic premise of category management? Why do you think that supermarkets have been at the forefront of the movement to use category management?
> Present a checklist of five factors for a chain retailer to review in determining how to allocate merchandise among its stores.
> What are the trade-offs in a retailer’s deciding how much to emphasize private brands rather than manufacturer brands?
> How could a major appliance repair service use the product life-cycle concept?
> Under what circumstances could a retailer carry a wide range of merchandise quality without hurting its image? When should the quality of merchandise carried be quite narrow?
> How could a convenience store use a basic stock list, a model stock plan, and a never-out list?
> Interview a local store owner and determine how he or she makes merchandise decisions. Evaluate that approach.
> What are the advantages and disadvantages of a centralized buying organization?
> Distinguish among these auditors. Under what circumstances would each be preferred? a. Outside auditor b. Company audit specialist c. Company department manager
> Is micromerchandising a good approach? Why or why not?
> What is the distinction between merchandising functions and the buying function?
> Describe and evaluate the merchandising philosophy of your favorite online retailer.
> Present a seven-item checklist for a retailer to use with its reverse logistics.
> What is vendor-managed inventory? How do both manufacturers and retailers benefit from its use?
> How could a neighborhood pizzeria be prepared for the variations in customer demand for home delivery during the day?
> Why are some retailers convinced that distribution centers must be used as the shipping points for merchandise from manufacturers while other retailers favor direct store distribution?
> What are the benefits of quick response inventory planning? What do you think are the risks?
> Distinguish between these two terms: logistics and inventory management. Give an example of each.
> Which is more difficult, implementing a merchandise plan for a small bookstore or Costco? Explain your answer.
> What are the attributes of good retail auditing?
> Under what circumstances should a retailer try to charge slotting allowances? How may this strategy backfire?
> Devise a checklist a retailer could use to negotiate opportunistic buying terms with suppliers.
> Cite the advantages and disadvantages associated with these merchandise sources for your regular ice-cream store. How would your answers differ for a global shoe chain? a. Company-owned. b. Outside, regularly used. c. Outside, new.
> What are the pros and cons of a retailer’s relying too much on a want book?
> What information should a department store gather before adding a new jewelry brand to its product mix?
> 17. A health food retailer has $120,000 in monthly operating expenses and planned monthly sales of $400,000. Reductions are planned to be $10,000. A profit goal of $40,000 is established. What is the required initial markup? a. 24.5% b. 36.6% c. 37.0% d
> 9. A toy store has average monthly sales of $80,000. Its sales for December were $120,000. What is the monthly sales index for December? a. 153 b. 67 c. 150 d. 400 10. If the October monthly sales index is 200 for the company mentioned in problem 9, wh
> The store in question 10 and 11 knows its cost complement for all merchandise purchased last year was 0.61; it projects this to remain constant. It expects to begin and end December with inventory valued at $140,000 at retail and estimates December reduc
> If the planned average monthly stock for the discount store in question 10 is $420,000 (at retail), how much inventory should be planned for August if the retailer uses the percentage variation method? Comment on this retailer’s choice of the percentage
> The sales of a full-line discount store are listed. Calculate the monthly sales indexes. What do they mean?
> Distinguish between horizontal and vertical retail audits. Develop a vertical audit form for an auto repair retailer.
> Which method of promotional budgeting should a small retailer use? A large retailer? Why?
> Describe the compensation structure of top Canadian executives.
> The Business Development Bank is willing to loan Su Mei the $ 25,000 she needs to start her new business. The loan will require monthly payments of $ 556.11 over five years. a. What is the effective monthly rate on this loan? b. With monthly compounding,
> To start a new business, Su Mei intends to borrow $ 25,000 from a local bank. If the bank asks her to repay the loan in five equal annual instalments of $6,935.24, determine the bank’s effective annual interest rate on the loan transaction. With annual c
> An investment promises to pay you $100 per year starting in five years. The cash flow from the investment is expected to increase by 3 percent per year forever. If alternative investments of similar risk earn a return of 9 percent per year, determine the
> A 20‐year semi-annual bond has just been issued with its coupon rate set at the current market yield of 6 percent. How much would the price of the bond change (in percentage terms) if the market yield suddenly fell by 50 basis points? How much would the
> Felix will need $ 10,000 per year for four years to pay for tuition. How much will Felix ’ s parents have to invest at the end of each year for the eight years before he begins his studies if their savings earn compound interest at 7 percent per year? As
> You have just won $50 million in a lottery and are offered two options: receive $40 million today or receive $5 million per year for the next 10 years. At what interest rate are you indifferent to the choice between the two options? If the interest rate
> Muriel would like to support the education of her favourite grand‐nephew, Stephen, who plans to begin university in three years. How much will Muriel have to invest today, at 5 percent, to be able to give Stephen $ 6,000 at the end of each year for four
> Franklin is trying to decide whether or not to take a philosophy course next semester. He finds the topic interesting, but being a business student, he wants to measure the cost of taking the course. After detailed thought and analysis, he has identified
> Demonstrate how to solve a typical retirement problem.
> A firm borrowed $3 million and paid 10 percent interest this year. It also paid a dividend of $1 per share on 500,000 shares outstanding. What is the firm ’ s cash flow from financing?
> A 12‐year, 7.5‐percent bond is callable in four years at a call price of $1,045. If the bond pays semi‐annual coupons and is selling for $1,038, what is the YTM and YTC of the bond? Is this bond likely to be called?
> A bond that matures in 10 years is callable in three years at a call price of $1,025. The bond has a semiannual coupon rate of 8 percent. If the YTM is 7.3 percent and the YTC is 6.92 percent, what is the bond’s current price? Is this bond likely to be c
> Bower is a Canadian investor. He noticed that the euro spot rate is currently quoted at C$1.4768 pereuro. The European interest rate is 6 percent on one‐year T‐bills, and the one‐year interest rate in Canada is 3 percent. The one‐year forward rate is C$1
> The Slice & Dice Investment Co. needs some help understanding the intricacies of bond pricing. It has observed the following prices for zero coupon bonds that have no risk of default: a . How much should Slice & Dice be willing to pay for a three
> Sapna would like to receive a real return of 5 percent per year on a bond investment at a time when the expected inflation rate is 2.5 percent. How much would she be willing to pay for a bond maturing in two years if it pays annual coupons at a (nominal)
> A bond with semi‐annual coupons at a rate of 10 percent will mature in one year. If the bond’s price is $1,010, use the trial‐and‐error method to find the YTM. Check your answer by using a financial calculator. What would the YTM be if the bond made annu
> A zero coupon bond has a par value of $1,000 and will mature in eight years. a . Calculate the current price of this bond if the market yield is: i) 7.75 percent; ii) 5.25 percent. b . In each case, calculate the percentage change in the price of the bon
> Consider a bond with five years to maturity, FV of $1,000, and a coupon rate of 6.5 percent (semi‐annual payments). a . Calculate the price of this bond if the market yield is: i) 7.75 percent; ii) 5.25 percent. b . In each case, calculate the percentage
> Calculate cash flow from operations for Tina’ s Business Inc. using the following information. Net income S80,000 Depreciation 6,000 Deferred income taxes 2,000 Decrease in inventories 10,000 Decrease in accounts receivable 2,000 De
> What are the scope and purpose of the auditor’s opinion?
> The Finn brothers are concerned that the financial statements for Finns ’ Fridges don ’ t reflect the true state of affairs. The company ’ s 25 customers were charged $10 for rent at the end of each month. Now that the academic year is over, five of thes
> David Finn notices that the local appliance store is now charging $210 for the same model of refrigerator his company bought for $200. Given that Finns ’ Fridges purchased 25 of these refrigerators, what should the company ’ s balance sheet show as the v
> Kash Kow Inc. pays out all its after‐tax earnings to shareholders in the form of dividends. Suppose that in 2015 the company earned $1 per share before tax. Corporate income tax was paid at a rate of 25%. Suppose a highincome shareholder receiving this d
> Suppose firms A and B have identical revenues and operating expenses, so that each has earnings before amortization and taxes of $10 million. Both firms will report amortization of $1 million on their public financial statements. On its tax return, firm
> Estimate cash flow from operations for KER Inc. using the following information. Net income $90,000 Depreciation 10,000 Deferred income taxes 5,000 Increase in inventories 20,000 Decrease in accounts receivable 1,000 Increase in accounts payable 2,00
> Calculate the receivables turnover, inventory turnover, and average collection period for a firm, given the following accounting data: accounts receivable are $600,000; accounts payable are $305,000; inventory is $550,000; gross profit is $550,000; sales
> Tina ’ s Business Inc. purchases one machine in its first year of business for $1,000,000. In year 2, it purchases another machine for $500,000. The CCA rate for these assets is 20 percent. a. Find the beginning UCC, CCA, and ending UCC in years 1 to 3 f
> Investor A just turned 20 years old and currently has no investments. She plans to invest $ 5,500 at the end of each year for eight years, beginning in five years. The rate of return on her investment is 15 percent, continuously compounded. Investor B is
> a. Determine the month‐end payment for a $ 200,000, 10‐year loan with an interest rate of 12 percent, compounded monthly, assuming there is no down payment. b. Calculate the outstanding loan amount after 18 months. c. Redo part (a), assuming it is a mort
> Five years ago, Franklin borrowed $ 250,000 to purchase a house in Sandy Lake. At the time, the quoted rate on the mortgage was 6 percent, the amortization period was 25 years, the term was five years, and the payments were made monthly. Now that the ter
> How do sinking funds work?
> Michelle is offered a loan of $ 30,000 that requires 60 monthly payments of $ 622.75. What is the effective annual interest rate on this loan? What would the quoted rate be?
> Jimmie wishes to buy a new car that will cost $29,000. a. How much will his monthly car payments be if he obtains a loan that is amortized over 60 months, and the nominal interest rate is 8.5 percent per year with monthly compounding? b. Create an amorti
> Alysha has decided to use $ 50,000 in savings to make a down payment on a house. She will live in the house for the next two years while still at university and then sell it when she graduates. The bank has offered her a mortgage rate of 5.1 percent comp
> Use the year 2 financial statements for Finns ’ Fridges to determine the company ’ s sustainable growth rate.
> Céline has just won a lottery. She will receive a payment of $ 6,000 at the end of each year for nine years. As an alternative, she can choose an immediate payment of $ 50,000. a. Which alternative should she pick if the interest rate is 5 percent? b. Wh
> How many years will it take for an investment to double in value if the rate of return is 9 percent and compounding occurs: a. annually? b. quarterly?
> Roger has his eye on a new car that will cost $ 20,000. He has $ 15,000 in his savings account, earning interest at a rate of 0.5 percent per month. a. How long (to the nearest month) will it be before he can buy the car? b. How long will it be before Ro
> Wilma would like to borrow $ 250,000 to start her own business. She would like to make monthly payments to repay the loan in 10 years. If the bank is quoting her a rate of 6 percent compounded quarterly, determine her monthly payment.
> Amanda would like to borrow $ 50,000 to pay one year ’s tuition at a private U.S. university. She would like to make quarterly payments and finish repaying the loan in five years. If the bank is quoting her a rate of 6 percent compounded monthly, determi
> Use the income statement for CP (Figure 3‐5) to calculate the average tax rate (tax paid as a percentage of net income) in 2014.
> How do callable bonds differ from retractable and extendable bonds?
> Based on CP’s balance sheet (Figure 3‐4), the firm ’s total current assets changed between the two years. Which component of the current assets changed the most? By what dollar amount and percentage did it increase or decrease?
> Other candy‐making firms have an average forward P/E ratio of 12 at this time. With a share price of $18.20, what are the expected 2017 EPS for Corine ’ s Candies if its forward P/E ratio is the same as the industry average?
> Corine ’ s Candies Inc. paid dividends of $1 million during2015. However, the company needed extra cash to open new stores, so it issued $1.4 million in new stock. What was Corine ’ s cash flow from financing in 2015?
> To achieve the target level of revenues in year 3 ($2,600), Finns ’ Fridges will have to buy some more equipment. This will increase the amortization expense to $1,422. Selling costs will be the same percentage of sales as in year 2, and the interest exp
> The Finn brothers are planning their third year of operations. As a first step in the process, create a “percentage of sales” statement of financial position for Finns ’ Fridges as of the end of year 2.
> At the end of its most recent fiscal period, the large appliance rental company mentioned in Practice Problem 19 had a working capital ratio of 4.3 percent and a current ratio of 18.2 percent. Calculate these ratios for Finns ’ Fridges at the end of year
> Prince Rupert Fly ‘n ’ Fish Inc. purchases one small plane in its first year of business for $90,000. In year 2, it purchases another plane for $100,000. Find the UCC at the end of year 3 if the CCA rate for aircraft is 25 percent.
> Determine the price‐earnings ratio, market‐to book ratio, and EBITDA ratio for year 2.
> Tina ‘ s Business Inc. bought machines some time ago for $25,000. She decided to sell all the assets from this pool at the end of this year. The pool of assets had a UCC of $5,000 before the sale, and the whole asset class was sold for $45,000. Calculate
> Suppose Prince Rupert Fly ‘ n ’ Fish Inc. (see Practice Problem 48) decides to sell its first aircraft for $50,000 in year 2 (purchased for $90,000 in year 1). As before, the second plane costs $100,000 and is bought and put in service in year 2. Find th
> What is moral hazard and why did it become the buzz word of the 2008 financial crisis?
> Determine liquidity ratios including working capital ratio, current ratio, and quick ratio for year 2. Explain the differences among the ratios.
> What is the apparent tax rate (tax paid as a percentage of net income) for firms A and B in Practice Problem 46?
> Suppose firms A and B have identical revenues and operating expenses, so that each has earnings before amortization and taxes of exactly $1 million. Both firms will report amortization of $250,000 on their public financial statements. On its tax return,
> Omar ’s business purchased several pieces of machinery some time ago for $25,000. At the beginning of the current year, this pool of assets had a UCC of $15,000. During the year, Omar decided to sell all the assets from this pool. For each of the three s
> Adam has saved C$1,000 and plans to go surfing in Australia next summer. He won’t need the money for a year, so he decides to invest it. Adam could invest the money in Canada, where a T‐bill will earn 4.5 percent, and then convert it to Australian dollar
> You are a financial advisor and one of your clients comes to you with a convertible bond that has a coupon rate of 8 percent. The market interest rate is 6 percent. The share price of the company that issued the bond is going down, and you don’t expect t
