Question 2 of 7 < >

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

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:

Required: 1. Compute the gross margin ratio (both with and without services revenue) and net profit margin ratio. 2. Compute the current ratio and acid-test ratio. 3. Compute the debt ratio and equity ratio. 4. What percent of its assets are current? What percent are long term?

Conoy 2018, a government department entered into a contract with Consultant Co Pty Ltd for the provision of services by Robert Black, an technician who is nominated in the contract. The contract specifies that Robert Is required to develop a product for use in the department's IT system in accordance with functionali specifications provided by the department. The contract specifies a fixed amount by way of payment to Consultant Co for the development of the product that is required to be produced within 12months of commencement of the contract. The contract is for the performance of a specific task that produces an outcome or result, with Robert maintaining a high level of discretion and flexibility as to how the work ought to be performed. Payment is not made until the work is performed, although installments are payable upon the achievement of particular milestones. Discuss the tax implications of the personal services income (PSI) legislation to the above arrangement, (500 words)

(a) Calculate the following ratios for McCrea plc in 2019. (1) Return on Capital Employed (ROCE) (ii) Operating profit margin (iii) Inventories' turnover period (iv) Settlement period for trade receivables (v) Current ratio (vi) Acid test ratio (vii) Gearing ratio (viii) Interest cover ratio (ix) Earnings Per Share (EPS)

Chocolate Delights is a growing 'Dessert Shop' operating in New Zealand. They specialise in producing chocolate desserts for the local communities in Palmerston North. Paul Henderson, the owner, has operated the shop from his personal name as a sole trader for many years. In the past, Paul had inherited patented recipes for desserts. This patent stops anyone from producing the exact same dessert, which increases the amount of goodwill for the business. He was halfway through the 2022 financial year and was nearing the GST turnover threshold. Before he registered for GST, his accountant suggested creating a new company that would shift his GST and other liability obligations from his personal debt to a company debt. On the 1. September 2021, based on the accountants advice, Paul decided to create a company called Chocolate Delights Ltd. The company is currently registered for six (6) monthly GST filing on a Payments Basis, and files financial statements on the 31 March. The company's IRD number is 111-111-111. I Events during Summer Paul had employed a barista to offer warm and cold beverages during the summer seasons. He was anxious about the idea as he marketed the business on just desserts. After doing some market research, he found that beverages could be a great side income to compliment the deserts. At the end of the first season, sales doubled compared to before. Paul was so impressed with the results that he wanted to establish new operation later in the year with a similar business model. | Events during June 2022 In the three (3) months following March, Chocolate Delights Ltd encountered significant growth in the warm and cold beverage market. Paul has already hired two additional baristas to help with demand, while the other crew continues creating desserts. His assumption was correct as people were buying both beverages and desserts. Due to the growth, Paul decided to expand operations into Lower Hutt on the 1st of May. Paul managed to sub-lease a big restaurant and moved there temporary to build up operations. Paul plans to use a similar business model, and this business will have access to the same patented recipes. I The Issue Despite all this growth, on 20 June 2022, Paul requires additional funding to maintain operations for his new shop. However, the local banks in the Greater Wellington Region have requested to see last year's Special Purpose Financial Reports with an inclusion of a Statement of Cash Flows. Your job will be to prepare these financial statements for Chocolate Delights Ltd as of 31 Marc Footer (Default Page Style) +/nInstructions This will cover the compilation of Special Purpose Financial Reports using Xero and Excel. Paul has provided you with a Trial Balance from a specialised POS/Accounting system as at 31 March. You are required to import this Trial Balance into Xero and prepare balance day adjustments to generate the Special Purpose Financial Reports. I Adjustments required: More information will be available in the following chapter. Here is the summary of adjustments you will need to make: Received Aged Accounts Receivable and Payables Reports as at 31 March to record into Xero. No Debtors and Creditors values are recorded in the Trial Balance. The Annual Loan Summary for the Motor Vehicle Finance is provided to prepare your Loan Adjustments. Received details regarding Payroll and GST to help you record any adjustments into Xero. The stocktake for ingredients at year-end was $5,650.00. Chocolate Delights is running a periodic inventory system. A closing inventory journal is required. Received details on a couple of accruals and deferrals and extra information of any bad and doubtful debts. You have obtained the list of assets currently being used or disposed of in the business. Use this information and Xero's inbuild asset register to prepare the adjustments for non-current assets. • During May 2022, Paul received the opportunity to refit all the kitchen appliances for $10,000, worth $25,000.00 due to a competition he won! Conduct an impairment review of the older kitchen appliances. After providing warm and cold refreshments to customers, Paul had a disagreement with a local barista across the road. They are currently suing for damages for the loss of goodwill of $50,000. The lawyer stated that there is a 50% chance of Paul losing this case in light of current information. A provision is required for 50% of the damages. Using your taxation understanding, prepare the tax calculation and record/n1 Related Parties Apart from the Current Account, Paul indicated a few related party transactions he would like to be fully disclosed in the notes for the financial statements: (Note: these have already been accounted for in the trial balance) 1. Paul reimbursed the company the cost price totalling $500.00 excluding GST for treats used personally 2. Paul has exclusive deals from a local store, and they weren't very impressed with the new company formation. So instead, he was reimbursed by the company for purchases of $20,000.00 excluding GST of supplies under his personal name.