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Instructions: Assume that WorldCom paid $7,000 million rental fees to other phone companies in cash at the beginning of Year 1. Instead of correctly debiting the Rental Expense account (i.e. as a revenue expenditure), WorldCom debited $7,000 million to the "Equipment" account (i.e. as a capital expenditure). And, assume that WorldCom depreciated its long-lived assets such as equipment using the straight-line method over 10 years without salvage value. Explain (using numbers in millions) how would this recording "delay expense recognition to future periods and thus boost net income for Year 1". (Ignore tax as tax rules are different from financial accounting rules.) And, Besides net income in the income statement, total assets in the balance sheet would also be wrong. Indicate how would total assets at the end of Year 1 be wrong ("overstated" or "understated") and by how much (in millions of dollars). (Hint: Writing out the related entries for "acquisition" and "depreciation" might help.)
Calculate the store's net present value, using an 18 percent required return.- Should Benford accept the project?
Linke Motors has a beta of 1.30, the T-bill rate is 3.00%, and the T-bond rate is 6.5%. what is the firm's required return?
What is your profit at the current exchange rate? What is your profit if the exchange rate goes down by 10 percent? What is the break-even exchange rate?
(Compound interest with nonannual periods?) Calculate the future sum of ?$4,000 ?, given that it will be held in the bank 8 years at an annual interest rate of 4 percent. Recalculate part? (a) using compounding periods that are? (1) semiannual and? (..
You have been offered a GPM loan that is originated for $200,000 at 6 percent for 30 years. Compute the payments required for the first six years on loan term.
The president of Real Time Ltd has asked you to evaluate the proposed acquisition of a new computer system. The system's price is $39,000, and will be depreciated straight-line over a three year life. Purchase of the system would require an increase ..
Assume that you deposit $ 2,069 into an account that pays 11 percent per annum. How much money will be in the account 24 years from today?
Travis is offered the following income stream of payments: $10,000 in one year, $20,000 in two years, and 50,000 in five years. How much should Travis be willing to pay for this income stream if his opportunity cost of capital is 6.5%?
What interest rate would the investment have to yield in order for Stanley’s brother to deliver on his promise?
Interest earning of 6 percent with a $500 minimum balance; average monthly balance, $600; monthly services charge of $15 for falling below the minimum balance, which occurs three times a year (no interest earned in these months.)
Briefly explain your answer. No credit without explanation. Support your answer with a graph if needed. Depreciation of the domestic currency today (i.e. EH/F in class) lowers the expected rate of return on foreign currency deposits.
under what circumstances would you support a high risk/high reward project?
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