10-12WACC Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of r, = 9% as long as it finances at its target capital structure, which calls for 35% debt and 65% common equity. Its last dividend (D) was$2.20, its expected constant growth rate is 6%, and its common stock sells for $26. EEČ's tax rate is 40%. Two projects are available: Project A has a rate of return of 12% and Project B's return is 11%. These two projects are equally risky and about as risky as the firm's existing assets. à. What is its cost of common eguity? b. What is the WACC? Which projects should Empire accept?

CORPORATE VALUATION Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is expected to grow at a constant rate of 4% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 10%. If Scampini has40 million shares of stock outstanding, what is the stock's value per share?9-5

COST OF COMMON EQUITY AND WACC Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 8%, and its marginal tax rate is 40%. The current stock price is P = $22.00. The last dividend was D, = $2.25, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?10-8

A hospital is considering to purchase a diagnostic machine costing P800 000. The projected life of the machine is 8 years and has an expected salvage value of P60 000 at the end of 8 years. The annual operating cost of the machine is 75 000. It is expected to generate revenues of P 400 000 per year for eight years. Presently, the hospital is outsourcing the diagnostic work and earning commission income of P120 000 per annum; net of taxes. a. Advise the hospital management whether it would be profitable to purchase the machine, basing your recommendation under: i.Net Present Value Method ii. Profitability Index Method b. What are the relative merits and demerits of the following investment appraisal techniques and what conclusions would you therefore draw about their relative attractiveness? i.Payback period; and ii.Accounting Rate of Return.

Part I: Excel (60 marks) Steps to Perform: Step 1 2 3 5 6 7 8 Instructions Start Excel. Download and open the file named grades_excel_for_al_xlsx. Rename the given worksheet as grades_Winter2022. Enter a heading for this document titled 'Student Grades for CIS1201 Winter 2022 in G2; merge G2 with cells H2, 12, J2, K2, and L2, such that the heading appears in the center of G2:L2. Increase its font to 16, change the font to Arial, and bold it. Note that A5:A104 are empty. Use the Fill Series feature to enter student ids beginning with 1111111 for A5, increase by 1 such that A104 gets 1111210. Note that the grades stored in the given sheet have an inconsistent format. Format all grades in the range B5:S104 with two decimal places and apply bold and center. The entire range of values should look the same after this step. Add a new column between Chapter11 and Final Exam and enter its description as Textbook assessment. This column will store the average grade a student achieved in the textbook chapter activities. Note that there are 11 chapters (columns H to R) - you must use a function that drops the lowest grade and uses the top 10 grades from these 11 columns to find the average grade and store it in Textbook assessment column. Format all grades in this column with two decimal places. The average must be in the percentage number format. Note that columns C and D store student's lab exam I and lab exam II grades. The max grade for these 2 columns is 10 but the instructor would like all grades to be stored in percentage (out of 100). Enter 10 in column C2; Use the copy-and-paste-special method to update the existing grades in columns C and D to be stored out of a max of 100 now (e.g. 9 should be updated 90). Reapply any formatting if it is removed, so the entire table is consistent. Create column U and call it 'Overall Grade'. Use a formula as given below to calculate the overall grade in a percentage number format (same as Step 6): Overall Grade = 10% of Lab Attendance (Column B) + 10% of Lab Exam I (Column C) + 10% of Lab Exam II (Column D) + 25% of (Assignment1+Assignment2+Assignment3) + 10% of Textbook Assessment + 35% of Final Exam / 100 Points Possible 0 2 2 2 2 6 5/nStep 9 10 11 12 13 14 15 16 17 Create column V and call it "Letter Grade'. Use a formula as given below to calculate the letter grade: OVERALL GRADE (COLUMN U) >= 80 < 80 AND >= 70 Instructions B с D F LETTER GRADE (COLUMN V) <70 AND >= 60 < 60 AND >= 50 <50 Hint: Use function IF in a nested way. Create a new worksheet and name it Overall statistics_W2022. Using cell referencing, copy the values in columns with Id. Overall Grade and Letter Grade from grades Winter2022 to this worksheet. ABCDE Count 52 23 Create a heading for this worksheet titled "Overall Statistics of Student Grades CIS1201 Winter 2022". This heading must have the same format as the heading from Step 3. F In worksheet Overall statistics_W2022, create a column, name it Grades, and fill it with letters A, B, C, D, and F. Create another column, name it Count and fill it with the total number of students that scored grades A, B, C, D or F. You must get the following count Grades A 11 8 6 Hint: Use function COUNTIF on C5:C104 of this worksheet. Draw a 3D-column graph using Grades as the X-axis and Count as the Y-axis. Title the graph as "Distribution of Grades - CIS1201 Winter2022"; title the X-axis as "Letter grades" and Y- axis as "Total Number of Students". In Rows 106, 107, 108 and 109, use functions to calculate and display the Mean, Median, Max value and Min Value of the overall grades in Column B of worksheet Overall statistics_W2022. Create a third worksheet and name it grades_Sorted_FinalExam. Add columns id, Final Exam, Overall Grade and Letter Grade. Sort this worksheet on the Final Exam grades, in order of largest to smallest. On the grades_Sorted_FinalExam sheet, insert the Draft.png picture on the Sheet Background. This can be downloaded from the assignment page on Courselink. Ensure that the worksheets are in the following order: grades_Winter2022, Overall statistics_W2022, grades_Sorted_FinalExam. Make sure that the workbook is saved as an Excel workbook, not a macro-enabled workbook. Close Excel, and then submit the workbook as directed. Total Points Points Possible 10 3 2 6 6 4 4 2 0 60

1. Assume that Business Solutions does not acquire additional office equipment or computer equipment in 2022. Com for the year ended December 31, 2022, for Depreciation expense-Office equipment and for Depreciation expense- equipment (assume use of the straight-line method). 2. Given the assumptions in part 1, what is the book value of both the office equipment and the computer equipment a 31, 2022? 3. Compute the three-month total asset turnover for Business Solutions as of March 31, 2022.

5. Which of the following is not a characteristic of a Code of Ethics: a) Provision of a standard for member's conduct b) Penalties for non-compliance c) Provision of a set of work practices d) Provision of a basis for public confidence e) None of the above

Phi, a U.S. firm, acquired 100 percent of Stu's outstanding stock at book value on January 1, 2016, forS112,000. Stu is a New Zealand based company, and its functional currency is the U.S. dollar. The exchange rate for New Zealand dollars (NZ$) was $0.70 when Phi acquired its interest. Stu's stakeholders' equity un January 1, 2016. consisted of NZ$150,000 capital stock and NZ$10.000 retained earnings. The adjusted trial balance for Stu at December 31, 20l6, is as follows: ADDITIO11. Prepaid expenses (supplies) of NZS18.000 were uu latul when Phi acquired Slu. Olher uperating expetsesinclade NZS8,000 of these supplies that were used in 2016. The remaining NZ$10,00X) of supplics is onband at year erd. 2. The N7$1200,000 cost of sales eonsists of NZS50,000 inventory on hand at Jamiary 1. 2016, and NZS100,000in purchuses during (he year, less NZS30,000 encting inventury that was acquired when tbe exchange rulewas $0.66. 3. The NZ$60,000) of equipment consists of NZ 50,000 included in the business combination and NZ$10,000 purchased daring 2011, when the exchange rare was $0.68. A depreciation rate of 20 percent is applicable to all equipment for 2016. 4. Exchange rates for 2016 ure summarized as follows:

CASE 8-33 Master Budget with Supporting Schedules LO8-2, LO8-4,LO8-8,LO8-9, LO8-10 You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of earrings, but all are sold for the same price-$10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): January (actual) February (actual) March (actual) April (budget) May (budget) June (budget) July (budget) August (budget) September (budget) The concentration of sales before and during May is due to Mother's Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month. Suppliers are paid $4 for a pair of earrings. One-half of a month's purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. Monthly operating expenses for the company are given below: 20,000 26,000 40,000 65,000 100,000 50,000 30,000 28,000 25,000 Variable: Sales commissions 4% of sales Fixed: Advertising Rent Salaries Utilities Insurance Depreciation $200,000 $18,000 $106,000 $7,000 $3,000 $14,000 Page 404 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $16,000 in new equipment during May and $40,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below:/nAssets Cash Accounts receivable ($26,000 February sales; $320,000 March sales) Inventory Prepaid insurance Property and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholder's equity Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: $ 74,000 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 346,000 104,000 21,000 950,000 $1,495,000 The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $50,000 in cash. $ 100,000 15,000 800,000 580,000 $1,495,000 2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000. 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach. 4. A budgeted balance sheet as of June 30.

Extra Credit (10 pts): On January 1, 2014, Cassandra Incorporated paid $300,000 for 60% of Hecuba Company's outstanding capital stock. Hecuba reported common stock on that date of $250,000 and retained earnings of $100,000. On that date, • Hecuba's equipment with a 5-year remaining life was undervalued by $10,000; • Hecuba's buildings with a 10-year remaining life was undervalued by $60,000; • Any remaining fair value/book value differential is allocated to goodwill. The income statements for the year ended December 31, 2014 of Cassandra and Hecuba are summarized below: Sales Income from Hecuba Cost of sales Depreciation equipment Depreciation - buildings Net Income Cassandra I/S Hecuba I/S $1,000,000 $400,000 Hecuba's net income and dividends paid the first two years that Cassandra owned them are shown below. Net Income Dividends paid $80,000 $30,000 10,000 2014 2015 a. b. d. MUST SHOW your calculations for: 43,200 (400,000) (120,000) (200,000) $323.200 Required: 1) Prepare a schedule to assign the difference between the fair value of the investment in Hecuba and the book value of the interest to identifiable and unidentifiable net assets AND to amortize identifiable net assets for each of the two years. (200,000) (40,000) (80.000) $80,000 90,000 Total excess over book value calculation (both implied value and book value of 100% Hecuba) Assigned amounts for identifiable net assets and goodwill Amortization expenses for 12/31/14 AND unamortized excess on 12/31/14 Amortization expenses for 12/31/15 AND unamortized excess on 12/31/15