(Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns

P6-2 (Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns.

(a) What is the amount of the payments that Ned Winslow must make at the end of each of 8 years to accumulate a fund of $90,000 by the end of the eighth year, if the fund earns 8% interest, compounded annually?

(b) Robert Hitchcock is 40 years old today and he wishes to accumulate $500,000 by his sixty-fifth birthday so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his fortieth through his sixty-fourth birthdays. What annual deposit must Robert make if the fund will earn 12% interest compounded annually?

(c) Diane Ross has $20,000 to invest today at 9% to pay a debt of $47,347. How many years will it take her to accumulate enough to liquidate the debt?

(d) Cindy Houston has a $27,600 debt that she wishes to repay 4 years from today; she has $19,553 that she intends to invest for the 4 years. What rate of interest will she need to earn annually in order to accumulate enough to pay the debt?

Click here for the solution: (Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns

The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede

Problem 3.15 The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede:

ACTIVITY DURATION (WEEKS) PRECEDES
A (START) 1 B,C
B 1 E
C 4 F
E 2 F
F(END) 2 -

a) Draw an AON diagram of the project, including activity durations.
c) What is the project duration (in weeks)?
d) What is the slack (in weeks) associated with any and all noncritical paths through the project?


Click here for the solution: The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede

4-56 The following table contains calculations of several key ratios for Indianola Pharmaceutical Company, a maker of proprietary and prescription drugs

4-56 (Analytical Review and Planning the Audit) The following table contains calculations of several key ratios for Indianola Pharmaceutical Company, a maker of proprietary and prescription drugs. The company is publicly held and is considered a small-to medium-size pharmaceutical company. Approximately 80% of its sales have been in prescription drugs; the remaining 20% are in medical supplies normally found in a drugstore. The primary purpose of the auditor’s calculations is to identify potential risk areas for the upcoming audit. The auditor recognizes that some of the data may signal the need to gather other industry- or company-specific data.

A number of the company’s drugs are patented. Its number-one selling drug, Anecillin, which will come off of patent in two years, has accounted for approximately 20% of the company's sales ‘during the past five years.

INDIANOLA PHARMACEUTICAL RATIO ANALYSIS

Ratio Current One Year Two Years Three Years Current
Year Previous Previous Previous Industry
Current ratio -----1.85 1.89 2.28 2.51 2.13
Quick ratio ------------------------------- 0.85 0.93 1.32 1.76 1.40
Interest coverage:
Times Interest earned------------------- 1.30 1.45 5.89 6.3 4.50
Days’ sales in receivables-------------- 109 96 100 72 69
Inventory turnover---------------------- 2.40 2.21 3.96 5.31 4.33
Days’ sales in inventory---------------- 152 165 92 69 84
Research & development as a
Percent of sales -------------------------- 1.3 1.4 1.94 2.03 4.26
Cost of goods sold as percent
Of sales------------------------------------ 38.5 40.2 41.2 43.8 44.5
Debt/equity ratio------------------------- 4.85 4.88 1.25 1.13 1.25
Earnings per share----------------------- $1.12 $2.50 $4.32 $4.26 n/a
Sales/tangible assets--------------------- 0.68 0.64 0.89 0.87 0.99
Sales/total assets------------------------- 0.33 0.35 0.89 0.87 0.78
Sales growth over past year---- 3% 15% 2% 4% 6%

Required
a. What major conclusions regarding financial reporting risk can be drawn from the information show in the table? Be specific in identifying specific account balances that have a high risk of misstatement. State how that risk analysis will be used in planning the audit. Be very specific in your answer. You should identify a minimum of four financial reporting risks that should be addressed during the audit and how they should be addressed.
b. What other critical background information might you want to obtain as part of the planning of the audit or would you gather during the conduct of the audit? Briefly indicate the probable sources of the information.
c. Based on the information, what major actions did the company take during the immediately preceding year? Explain.


Click here for the solution: The following table contains calculations of several key ratios for Indianola Pharmaceutical Company, a maker of proprietary and prescription drugs

Prepare a table with the following headings for a monthly bank reconciliation dated September 30

ACC 225 Week 8

Exercise 8-6

Prepare a table with the following headings for a monthly bank reconciliation dated September 30:

For each item 1 through 12, place an x in the appropriate column to indicate whether the item should be added to or deducted from the book or bank balance, or whether it should not appear on the reconciliation. If the book balance is to be adjusted, place a Dr. or Cr. in the Adjust column to indicate whether the Cash balance should be debited or credited. At the left side of your table, number the items to correspond to the following list.

1. Bank service charge.
2. Checks written and mailed to payees on October 2.
3. Checks written by another depositor but charged against this company’s account.
4. Principal and interest on a note collected by the bank but not yet recorded by the company.
5. Special bank charge for collection of note in part 4 on this company’s behalf.
6. Check written against the company’s account and cleared by the bank; erroneously not recorded by the company’s recordkeeper.
7. Interest earned on the cash balance in the bank.
8. Night deposit made on September 30 after the bank closed.
9. Checks outstanding on August 31 that cleared the bank in September.
10. NSF check from customer returned on September 25 but not yet recorded by this company.
11. Checks written by the company and mailed to payees on September 30.
12. Deposit made on September 5 and processed by the bank on September 6.


Click here for the solution: Prepare a table with the following headings for a monthly bank reconciliation dated September 30

Using the appropriate interest table, compute the present values of the

E6-5 (Computation of Present Value) Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.
(a) $50,000 receivable at the end of each period for 8 periods compounded at 12%.
(b) $50,000 payments to be made at the end of each period for 16 periods at 9%.
(c) $50,000 payable at the end of the seventh, eighth, ninth, and tenth periods at 12%.

Click here for the solution: Using the appropriate interest table, compute the present values of the

The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253

E6–2 The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253.

a. Use the information to plot a yield curve for this date.
b. If the expectations hypothesis is true, approximately what rate of return do investors expect a 5-year Treasury note to pay 5 years from now?
c. If the expectations hypothesis is true, approximately (ignoring compounding) what rate of return do investors expect a 1-year Treasury security to pay starting 2 years from now?
d. Is it possible that even though the yield curve slopes up in this problem, investors do not expect rising interest rates? Explain.

Click here for the solution: The yields for Treasuries with differing maturities on a recent day were as shown in the table on page 253

The yields for Treasuries with differing maturities, including an estimate of the real rate of interest, on a recent day were as shown in the following table

E6–3 The yields for Treasuries with differing maturities, including an estimate of the real rate of interest, on a recent day were as shown in the following table:

Maturity Yield Real rate of interest
3 months 1.41% 0.80%
6 months 1.71 0.80
2 years 2.68 0.80
3 years 3.01 0.80
5 years 3.70 0.80
10 years 4.51 0.80
30 years 5.25 0.80

Use the information in the preceding table to calculate the inflation expectation for each maturity.

Click here for the solution: The yields for Treasuries with differing maturities, including an estimate of the real rate of interest, on a recent day were as shown in the following table

Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in the following table

(Dividend policies) Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in the following table. The firm has 7,500,000 shares of common stock outstanding. As assistant to the CFO, you are asked to determine the yearly dividend per share to be paid depending on the following possible policies:

YEAR PROFITS AFTER TAXES
1 $ 18,000,000
2 21,000,000
3 19,000,000
4 23,000,000
5 25,000,000

a. A stable dollar dividend targeted at 40 percent of earnings over a 5-year period
b. A small, regular dividend of $0.60 per share plus a year-end extra when the profits in any year exceed $20,000,000. The year-end extra dividend will equal 50 percent of profits exceeding $20,000,000.
c. A constant dividend payout ratio of 40 percent

Click here for the solution: Final earnings estimates for Chilean Health Spa & Fitness Center have been prepared for the CFO of the company and are shown in the following table

Recalling the definitions of risk premiums from Chapter 8 and using the Treasury bill return in Table 12.4 as an approximation to the nominal risk-free rate

P12-3 Recalling the definitions of risk premiums from Chapter 8 and using the Treasury bill return in Table 12.4 as an approximation to the nominal risk-free rate, what is the risk premium from investing in each of the other asset classes listed in Table 12.4?

Click here for the solution: Recalling the definitions of risk premiums from Chapter 8 and using the Treasury bill return in Table 12.4 as an approximation to the nominal risk-free rate