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Objective : Explain underlying accounting concepts, assumptions, and principles of accounting) Meagan Wallace is chairman of the board of New Age Foods, Inc. Suppose Ms. Wallace has just founded New Age Foods, and assume that she treats her home and other personal assets as part of New Age Foods. Answer these questions about the evaluation of New Age Foods, Inc.
1. Which accounting assumption governs this situation?
2. How can the proper application of this accounting assumption give Wallace and others a realistic view of New Age Foods, Inc.? Explain in detail.
Bui Corp. pays a constant $12 dividend on its stock. The company will maintain this dividend for the next nine years and will then cease paying dividends forever. Required: If the required return on this stock is 10 percent, what is the current share..
One year (2014) Alpha issued 10 year bond at par value. The coupon rate of these bonds is 7% and pay interest semi-annually. Today (2015) the interest rate on these bonds has decreased to 6.2% (the bonds currently have a YTM of 6.2%). 1. What was the..
The volatility of a certain market variable is 30% per annum. Calculate a 99% confidence interval for the size of the percentage daily change in the variable.
A 5.25% coupon municipal bond has 16 years left to maturity and has a price quote of 96.75. The bond can be called in 6 years. The call premium is one year of coupon payments. Compute the bond's current yield, yield to maturity, taxable equivalent yi..
Estimate Costcos cost of equity capital - How much will your dream car cost by the time you are ready to buy it?
Due to increasing value of the Yuan the Chinese electronics manufacturers have been suffering losses. At the same time the cost of a rare-earth mineral used in production of their goods has been increasing steadily due to increasing demand. You have ..
The Wolf's Den Outdoor Gear is considering replacing the equipment it uses to produce tents. The equipment would cost $1.4 million and lower manufacturing costs by an estimated $215,000 a year. The equipment will be depreciated over 8 years using str..
Lisa Simpson wants to have $1,700,000 in 60 years by making equal annual end-of-the-year deposits into a tax-deferred account paying 9.75 percent annually. What must Lisa’s annual deposit be?
Your grandparents have a small pension and social security. They have $300,000 in a savings account earning 1%. A person at their church said that if they invest $200,000 in this real estate deal they could earn 12% a year and it is safe because it i..
A firm has common stock of $97, paid-in surplus of $340, total liabilities of $445, current assets of $460, and fixed assets of $670. What is the amount of the shareholders' equity?
Another investment opportunity available to your company involves the purchase of some common stock from Zorp Corporation. The growth rate on the stock is constant at 3% per year, and your company's required return on the stock would be 11%. What is ..
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 12 percent 3 years ago. The bond currently sells for 94 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wh..
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