ACC 280
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 Week 5 Solution
5. Learning Team Assignment: Ch.8 & 15 Textbook Exercises
• Resources: Ch. 8 & 15 of Financial Accounting
• Prepare written answers to the following assignments from Ch. 8 & 15 of Financial Accounting:
o Chapter 8:
• Exercise E8-5 & BYP8-6 – Ethics Case
o Chapter 15:
• Problem P15-1 & Problem P15-6
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Saturday, April 3, 2010
ACC 280: Week Four Solution
ACC 280
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 Week 4 Solution
2. Individual Assignment: Ch. 4 Textbook Exercises
• Resources: Ch. 4 of Financial Accounting
• Prepare written answers to the following assignments from Ch. 4 of Financial Accounting:
o Exercise E4-2
o Exercise E4-3
o Exercise E4-4
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Are you looking for XACC 280? Click here.
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 Week 4 Solution
2. Individual Assignment: Ch. 4 Textbook Exercises
• Resources: Ch. 4 of Financial Accounting
• Prepare written answers to the following assignments from Ch. 4 of Financial Accounting:
o Exercise E4-2
o Exercise E4-3
o Exercise E4-4
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ACC 280: Week Three Solution
ACC 280
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 Week 3 Solution
2. Individual Assignment: Ch. 3 Textbook Exercises
• Resources: Ch. 3 of Financial Accounting
• Prepare written answers to the following assignments from Ch. 3 of Financial Accounting:
o Ch. 3: E3-2 , E3-7 & E3-8
Click here for the SOLUTION
Are you looking for XACC 280? Click here.
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 Week 3 Solution
2. Individual Assignment: Ch. 3 Textbook Exercises
• Resources: Ch. 3 of Financial Accounting
• Prepare written answers to the following assignments from Ch. 3 of Financial Accounting:
o Ch. 3: E3-2 , E3-7 & E3-8
Click here for the SOLUTION
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ACC 280: Week Two Solution
ACC 280
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 Week 2 Solution
2. Individual Assignment: Ch. 1, 2, & 7 Textbook Exercises
• Resources: Ch. 1, 2 & 7 of Financial Accounting
• Prepare written answers to the following assignments:
o Ch. 1: E1-12
o Ch 2: E2-2 & E2-3
o Ch 7: Questions 1 & 2 and E7-3
Click here for the SOLUTION
Are you looking for XACC 280? Click here.
Axia College of University of Phoenix (UoP)
Principles of Accounting
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.
ACC 280 Week 2 Solution
2. Individual Assignment: Ch. 1, 2, & 7 Textbook Exercises
• Resources: Ch. 1, 2 & 7 of Financial Accounting
• Prepare written answers to the following assignments:
o Ch. 1: E1-12
o Ch 2: E2-2 & E2-3
o Ch 7: Questions 1 & 2 and E7-3
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Friday, April 2, 2010
P10–4 Murdock Paints: Basic Sensitivity Analysis
Principles of Managerial Finance
Gitman, Lawrence J
P10–4 Murdock Paints
Basic Sensitivity Analysis
Murdock Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table.
Project A Project B
Initial investment (CF0) $9,000 $9,000
Outcome Annual cash inflows (CF)
Pessimistic $ 300 $ 1000
Most likely 1,100 1,100
Optimistic 1,900 1,200
1. Determine the range of annual cash inflows for each of the two projects.
2. Assume that the firm' s cost of capital is 10% and that both projects have 20-year lives. Construct a table similar to this for the NPVs for each project. Include the range of NPVs for each project.
3. Do parts a and b provide consistent views of the two projects? Explain.
4. Which project do you recommend? Why?
Click here for the SOLUTION
Gitman, Lawrence J
P10–4 Murdock Paints
Basic Sensitivity Analysis
Murdock Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table.
Project A Project B
Initial investment (CF0) $9,000 $9,000
Outcome Annual cash inflows (CF)
Pessimistic $ 300 $ 1000
Most likely 1,100 1,100
Optimistic 1,900 1,200
1. Determine the range of annual cash inflows for each of the two projects.
2. Assume that the firm' s cost of capital is 10% and that both projects have 20-year lives. Construct a table similar to this for the NPVs for each project. Include the range of NPVs for each project.
3. Do parts a and b provide consistent views of the two projects? Explain.
4. Which project do you recommend? Why?
Click here for the SOLUTION
Sunday, February 21, 2010
B6. Cash flows and NPV for a Replacement Decision
B6. (Cash Flows and NPV for a Replacement Decision)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B6. (Cash Flows and NPV for a Replacement Decision) Andrew Thompson Interests (ATI) is using a mechanical switching system that it bought five years ago for $400,000. This mechanical system is being depreciated straight line to an estimated salvage value of zero over a 10-year life. Thus, the annual depreciation charge is $40,000 and current book value is $200,000. At the end of its life, the actual salvage value is expected to be $25,000. If ATI sold this equipment today, it would fetch $100,000. ATI is evaluating a new digital switching system that will cost $500,000. The digital system is depreciated straight line to a zero salvage value over a five-year life. At the end of the five years, ATI expects to sell the system for $150,000. The new digital system should have a favorable impact on operating cash flows, increasing revenues by $100,000 annually and decreasing cash operating expenses by $50,000 annually. The new equipment has no effect on the investment in working capital. ATI is in the 40% tax bracket and has a 12% cost of capital. Consider each of the following questions assuming that ATI sells the old mechanical switching system and replaces it with the new digital system.
a. What is the net investment?
b. What is the after-tax net operating cash flow for each of the five years?
c. What is the after-tax salvage value?
d. What is the NPV of this investment?
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Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B6. (Cash Flows and NPV for a Replacement Decision) Andrew Thompson Interests (ATI) is using a mechanical switching system that it bought five years ago for $400,000. This mechanical system is being depreciated straight line to an estimated salvage value of zero over a 10-year life. Thus, the annual depreciation charge is $40,000 and current book value is $200,000. At the end of its life, the actual salvage value is expected to be $25,000. If ATI sold this equipment today, it would fetch $100,000. ATI is evaluating a new digital switching system that will cost $500,000. The digital system is depreciated straight line to a zero salvage value over a five-year life. At the end of the five years, ATI expects to sell the system for $150,000. The new digital system should have a favorable impact on operating cash flows, increasing revenues by $100,000 annually and decreasing cash operating expenses by $50,000 annually. The new equipment has no effect on the investment in working capital. ATI is in the 40% tax bracket and has a 12% cost of capital. Consider each of the following questions assuming that ATI sells the old mechanical switching system and replaces it with the new digital system.
a. What is the net investment?
b. What is the after-tax net operating cash flow for each of the five years?
c. What is the after-tax salvage value?
d. What is the NPV of this investment?
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B5. Cash Flows and NPV for a New Project
B5. (Cash Flows and NPV for a New Project)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B5. (Cash Flows and NPV for a New Project) Syracuse Roadbuilding Company is considering the purchase of a new tandem box dump truck. The truck costs $95,000, and an additional $5,000 is needed to paint it with the firm logo and install radio equipment. Assume the truck falls into the MACRS three-year class. The truck will generate no additional revenues, but it will reduce cash operating expenses by $35,000 per year. The truck will be sold for $40,000 after its five-year life. An inventory investment of $4,000 is required during the life of the investment. Syracuse Roadbuilding is in the 45% income tax bracket.
a. What is the net investment?
b. What is the after-tax net operating cash flow for each of the five years?
c. What is the after-tax salvage value?
d. Assuming a 10% cost of capital, what is the NPV of this investment?
c. What is the WACC?
Click here for the SOLUTION
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B5. (Cash Flows and NPV for a New Project) Syracuse Roadbuilding Company is considering the purchase of a new tandem box dump truck. The truck costs $95,000, and an additional $5,000 is needed to paint it with the firm logo and install radio equipment. Assume the truck falls into the MACRS three-year class. The truck will generate no additional revenues, but it will reduce cash operating expenses by $35,000 per year. The truck will be sold for $40,000 after its five-year life. An inventory investment of $4,000 is required during the life of the investment. Syracuse Roadbuilding is in the 45% income tax bracket.
a. What is the net investment?
b. What is the after-tax net operating cash flow for each of the five years?
c. What is the after-tax salvage value?
d. Assuming a 10% cost of capital, what is the NPV of this investment?
c. What is the WACC?
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A10. Dividend Adjustment Model
A10. (Dividend Adjustment Model)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
A10. (Dividend Adjustment Model) Regional Software has made a bundle selling spreadsheet software and has begun paying cash dividends. The firm’s chief financial officer would like the firm to distribute 25% of its annual earnings (POR = 0.25) and adjust the dividend rate to changes in earnings per share at the rate ADJ = 0.75. Regional paid $1.00 per share in dividends last year. It will earn at least $8.00 per share this year and each year in the foreseeable future. Use the dividend adjustment model, Equation (18.1), to calculate projected dividends per share for this year and the next four.
Click here for the SOLUTION
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
A10. (Dividend Adjustment Model) Regional Software has made a bundle selling spreadsheet software and has begun paying cash dividends. The firm’s chief financial officer would like the firm to distribute 25% of its annual earnings (POR = 0.25) and adjust the dividend rate to changes in earnings per share at the rate ADJ = 0.75. Regional paid $1.00 per share in dividends last year. It will earn at least $8.00 per share this year and each year in the foreseeable future. Use the dividend adjustment model, Equation (18.1), to calculate projected dividends per share for this year and the next four.
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B2. Dividend Policy
B2. (Dividend Policy)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B2. (Dividend Policy) A firm has 20 million common shares outstanding. It currently pays out $1.50 per share per year in cash dividends on its common stock. Historically, its payout ratio has ranged from 30% to 35%. Over the next five years it expects the earnings and discretionary cash flow shown below in mill ions.
a. Over the five-year period, what is the maximum overall payout ratio the firm could
achieve without triggering a securities issue?
b. Recommend a reasonable dividend policy for paying out discretionary cash flow in years 1 through 5.
1 2 3 4 5 THEREAFTER
Earnings 100 125 150 120 140 150+per year
Discretionary cash flow50 70 60 20 15 50+per year
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Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B2. (Dividend Policy) A firm has 20 million common shares outstanding. It currently pays out $1.50 per share per year in cash dividends on its common stock. Historically, its payout ratio has ranged from 30% to 35%. Over the next five years it expects the earnings and discretionary cash flow shown below in mill ions.
a. Over the five-year period, what is the maximum overall payout ratio the firm could
achieve without triggering a securities issue?
b. Recommend a reasonable dividend policy for paying out discretionary cash flow in years 1 through 5.
1 2 3 4 5 THEREAFTER
Earnings 100 125 150 120 140 150+per year
Discretionary cash flow50 70 60 20 15 50+per year
Click here for the SOLUTION
Saturday, February 6, 2010
B9. Estimating the WACC
B9. (Estimating the WACC)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B9. (Estimating the WACC) Fuerst Cola has 10,000 bonds and 400,000 shares outstanding.
The bonds have a 10% annual coupon, $1,000 face value, $1,050 market value, and 10-year maturity. The beta on the stock is 1.30 and its price per share is $40. The riskless return is 6%, the expected market return is 14%, and Fuerst Cola’s tax rate is 40%.
a. What is the after-tax cost of debt financing?
b. What is the after-tax cost of equity financing?
c. What is the WACC?
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Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter , Problems
B9. (Estimating the WACC) Fuerst Cola has 10,000 bonds and 400,000 shares outstanding.
The bonds have a 10% annual coupon, $1,000 face value, $1,050 market value, and 10-year maturity. The beta on the stock is 1.30 and its price per share is $40. The riskless return is 6%, the expected market return is 14%, and Fuerst Cola’s tax rate is 40%.
a. What is the after-tax cost of debt financing?
b. What is the after-tax cost of equity financing?
c. What is the WACC?
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C1. Beta and Required Return
C1. (Beta and Required Return)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 7, Problems
C1. (Beta and Required Return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here.
a. Calculate the expected returns on the stock market and on Chicago Gear stock.
b. What is Chicago Gear’s beta?
c. What is Chicago Gear’s required return according to the CAPM?
Realized Return
State of the Market Probability that State Occurs Stock Market Chicago Gear
Stagnant 0.20 (10%) (15%)
Slow growth 0.35 10 15
Average growth 0.30 15 25
Rapid growth 0.15 25 35
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Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 7, Problems
C1. (Beta and Required Return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here.
a. Calculate the expected returns on the stock market and on Chicago Gear stock.
b. What is Chicago Gear’s beta?
c. What is Chicago Gear’s required return according to the CAPM?
Realized Return
State of the Market Probability that State Occurs Stock Market Chicago Gear
Stagnant 0.20 (10%) (15%)
Slow growth 0.35 10 15
Average growth 0.30 15 25
Rapid growth 0.15 25 35
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B20. Constant Growth Model
B20. (Constant Growth Model)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 5, Problems
B20. (Constant Growth Model) Medtrans is a profitable firm that is not paying a dividend on its common stock. James Weber, an analyst for A. G. Edwards, believes that Medtrans will begin paying a $1.00 per share dividend in two years and that the dividend will increase 6% annually thereafter. Bret Kimes, one of James’ colleagues at the same firm, is less optimistic. Bret thinks that Medtrans will begin paying a dividend in four years, that the dividend will be $1.00, and that it will grow at 4% annually. James and Bret agree that the required return for Medtrans is 13%.
a. What value would James estimate for this firm?
b. What value would Bret assign to the Medtrans stock?
Click here for the SOLUTION
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 5, Problems
B20. (Constant Growth Model) Medtrans is a profitable firm that is not paying a dividend on its common stock. James Weber, an analyst for A. G. Edwards, believes that Medtrans will begin paying a $1.00 per share dividend in two years and that the dividend will increase 6% annually thereafter. Bret Kimes, one of James’ colleagues at the same firm, is less optimistic. Bret thinks that Medtrans will begin paying a dividend in four years, that the dividend will be $1.00, and that it will grow at 4% annually. James and Bret agree that the required return for Medtrans is 13%.
a. What value would James estimate for this firm?
b. What value would Bret assign to the Medtrans stock?
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B18. Default Risk
B18. (Default Risk)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 5, Problems
B18. (Default Risk) You buy a very risky bond that promises a 9.5% coupon and return of the $1,000 principal in 10 years. You pay only $500 for the bond.
a. You receive the coupon payments for three years and the bond defaults. After liquidating the firm, the bondholders receive a distribution of $150 per bond at the end of 3.5 years. What is the realized return on your investment?
b. The firm does far better than expected and bondholders receive all of the promised interest and principal payments. What is the realized return on your investment?
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Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 5, Problems
B18. (Default Risk) You buy a very risky bond that promises a 9.5% coupon and return of the $1,000 principal in 10 years. You pay only $500 for the bond.
a. You receive the coupon payments for three years and the bond defaults. After liquidating the firm, the bondholders receive a distribution of $150 per bond at the end of 3.5 years. What is the realized return on your investment?
b. The firm does far better than expected and bondholders receive all of the promised interest and principal payments. What is the realized return on your investment?
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B16. Interest-Rate Risk
B16. (Interest-rate risk)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 5, Problems
B16. (Interest-rate risk) Philadelphia Electric has many bonds trading on the New York Stock Exchange. Suppose PhilEl’s bonds have identical coupon rates of 9.125% but that one issue matures in 1 year, one in 7 years, and the third in 15 years. Assume that a coupon payment was made yesterday.
a. If the yield to maturity for all three bonds is 8%, what is the fair price of each bond?
b. Suppose that the yield to maturity for all of these bonds changed instantaneously to 7%. What is the fair price of each bond now?
c. Suppose that the yield to maturity for all of these bonds changed instantaneously again, this time to 9%. Now what is the fair price of each bond?
d. Based on the fair prices at the various yields to maturity, is interest-rate risk the same, higher, or lower for longer-versus shorter-maturity bonds?
Click here for the SOLUTION
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set
Chapter 5, Problems
B16. (Interest-rate risk) Philadelphia Electric has many bonds trading on the New York Stock Exchange. Suppose PhilEl’s bonds have identical coupon rates of 9.125% but that one issue matures in 1 year, one in 7 years, and the third in 15 years. Assume that a coupon payment was made yesterday.
a. If the yield to maturity for all three bonds is 8%, what is the fair price of each bond?
b. Suppose that the yield to maturity for all of these bonds changed instantaneously to 7%. What is the fair price of each bond now?
c. Suppose that the yield to maturity for all of these bonds changed instantaneously again, this time to 9%. Now what is the fair price of each bond?
d. Based on the fair prices at the various yields to maturity, is interest-rate risk the same, higher, or lower for longer-versus shorter-maturity bonds?
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