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Question: A Financial Statement Restatement: Sunbeam (Hard) By the mid-1990s, Sunbeam Corporation, the once celebrated household appliance manufacturer, was reporting lackluster sales and losses. New management, engaged in 1996 to turn the company around, implemented a major restructuring and trumpeted higher sales and profitability. The firm's stock price rose 50 percent over 1997 as results confirmed the predictions. In 1998, the firm restated its annual reports for 1996 and 1997 with the following introduction: Subsequent to the issuance of the Company Consolidated Financial Statements for the fiscal years ended December 28, 1997, and December 29, 1996, it was determined that the reported results generally inflated 1997 results at the expense of 1996 results. The firm's stock price dropped from $50 to $10 after the announcement of the restatement. Part of the restatement had to do with improperly recognized sales. Net sales for 1997 were restated from $1.168 billion down to $1.073 billion but those for 1996 were unchanged. Expenses in both years were affected, however. Exhibits 18.2 and 18.3 are the original and restated cash flow from operations. What were the aspects of the original reports that had to be restated?
In its negotiations with its investment bankers, Patton Electronics has reached an agreement whereby the investment bankers receive a smaller fee now (6% of gross proceeds versus their normal 10%) but also receive a 1-year option to purchase an addit..
Deriving forecasts of the future spot rate. Use the forward rate to forecast the percentage change in the Mexican peso over the next year.
What is the present value of $10,000 to be received each year for 20 years if the payments start immediately? Assume a discount rate of 7%.
James wants to convert $30,000 balance in his traditional IRA account into a Roth IRA. What is the account value in 35 years assuming expected growth of 5.7% and current tax rate of 25% and expected marginal tax rate at time of first distribution of ..
You are evaluating two different silicon wafer milling machines. The Techron I costs $249,000, has a three-year life, and has pretax operating costs of $66,000 per year. use straight-line depreciation to zero over the project’s life and assume a salv..
What annual rate of return is the investment offering?
Stock X has an expected return of 0.11. It has a beta estimated at 1, a risk-free rate of 0.03 and a risk premium of 6.1. Its variance of returns is 0.0209. All returns here are expressed as decimals, not percentages. What is its coefficient of varia..
A stock has a beta of 1.15 and an expected return of 13 percent. A risk-free asset currently earns 2.8 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets has a beta of ...
Talmud Book Company borrows $18,600 for 60 days at 18 percent interest. What is the dollar cost of the loan?
Other things held constant, which of the following would lead to a shorter cash conversion cycle?
You currently have 10,000,000 to invest and can earn 15% interest compounded annually. How much would you have at the end of 5 years, 10 years, 15 years, and 20 years?
Your firm has an average collection period of 53 days. Current practice is to factor all receivables immediately at a 2 percent discount. What is the effective cost of borrowing in this case? Assume that default is extremely unlikely.
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