AIKON ltd. is a new technology company

AIKON ltd. is a new technology company. They recently announced their plan to invest in new operating system. As a result, no dividends will be paid for the next two years followed by an estimated dividend of $0.30 in the third year. They are expected to grow at 9% per year for the following four years followed by 7.5% per year for two years. After that the company is expected to grow at a stable rate of 5% per year.

Required:

What is the intrinsic value (per share) of the company if the market required rate of return is 11.5% p.a?

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Cool Cooking Tools Ltd, manufacturer of gourmet cooking utensils

Cost of goods manufactured; overapplied or underapplied overhead; journal entries (10 Marks)

Cool Cooking Tools Ltd, manufacturer of gourmet cooking utensils, uses job costing. Manufacturing overhead is applied to production at a predetermined overhead rate of 150 per cent of direct labour cost. Any overapplied or underapplied manufacturing overhead is closed to cost of goods sold at the end of each month. Additional information:

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Job SR22, consisting of ceramic spoon rests, was the only job in process on 31 January, with accumulated costs as follows:

Direct material                          $4000

Direct labour                             2000

Applied manufacturing overhead    3000

Total                                       $9000

Jobs BS67, TR29 and GT108 were started during February.

Direct materials requisitions during February totalled $26 000.

Direct labour cost of $20 000 was incurred during February.

Manufacturing overhead incurred in February was $32 000.

The only job still in process on 28 February was job number GT108, with costs of $2800 for direct material and $1800 for direct labour.

Required:

1. Calculate the cost of goods manufactured for February.

2. Calculate the amount of overapplied or underapplied overhead to be closed to cost of goods sold on 28 February.

3. Prepare journal entries to record the events described in requirements 1 and 2.

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A market researcher for an automobile company suspects differences

A market researcher for an automobile company suspects differences in preferred color between male and female buyers. Advertisements targeted to different groups should take such differences into account, if they exist. The researcher examines the most recent sales information of a particular car that comes in three colors. Use Table 3.

Gender of Automobile Buyer  ColorMaleFemale  Silver459270  Black534287  Red488362

a. Choose the competing hypotheses to determine whether color preference depends on gender.   H0: Color preference is independent of gender; HA: Color preference is dependent on gender.H0: Color preference is dependent on gender; HA: Color preference is independent of gender.

b. Find the critical value at the 10.0% significance level. (Round your answer to 2 decimal places.)

Critical value

c. Calculate the value of the test statistic. (Round the intermediate calculations to at least 4 decimal places and final answer to 2 decimal places.)

Test statistic

d-1. What is the conclusion?   Do not reject H0; there is not enough evidence to support the claim that color preference is not independent.Reject H0; there is not enough evidence to support the claim that color preference is not independent.Do not reject H0; there is enough evidence to support the claim that color preference is not independent.Reject H0; there is enough evidence to support the claim that color preference is not independent.

d-2. Does your conclusion suggest that the company should target advertisements differently for males versus females?

Here’s the SOLUTION

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The Chartered Financial Analyst (CFA®) designation is fast becoming

The Chartered Financial Analyst (CFA®) designation is fast becoming a requirement for serious investment professionals. It is an attractive alternative to getting an MBA for students wanting a career in investment. A student of finance is curious to know if a CFA designation is a more lucrative option than an MBA. He collects data on 38 recent CFAs with a mean salary of $138,000 and a standard deviation of $34,000. A sample of 80 MBAs results in a mean salary of $130,000 with a standard deviation of $46,000. Use Table 2.

μ1 is the population mean for individuals with a CFA designation and μ2 is the population mean of individuals with MBAs. Let CFAs and MBAs represent population 1 and population 2, respectively.

a-1.Set up the hypotheses to test if a CFA designation is more lucrative than an MBA at the 5% significance level. Do not assume that the population variances are equal.

a. H0: μ1 − μ2 = 0; HA: μ1 − μ2 ≠ 0

b. H0: μ1 − μ2 ≥ 0; HA: μ1 − μ2 < 0

c. H0: μ1 − μ2 ≤ 0; HA: μ1 − μ2 > 0

a-2.Calculate the value of the test statistic. (Round all intermediate calculations to at least 4 decimal places and final answer to 2 decimal places.)

a-3.Approximate the p-value.

a. p-value < 0.01

b. 0.01 ≤ p-value < 0.025

c. 0.025 ≤ p-value < 0.05

d. 0.05 ≤ p-value < 0.10

e. p-value ≥ 0.10

a-4.Do you reject the null hypothesis at the 5% level?

a. Yes, since the p-value is less than α.

b. No, since the p-value is less than α.

c. Yes, since the p-value is more than α.

d. No, since the p-value is more than α.

b.Using the critical value approach, can we conclude that CFA is more lucrative?

a. Yes, since the value of the test statistic is less than the critical value of 1.661.

b. Yes, since the value of the test statistic is less than the critical value of 1.985.

c. No, since the value of the test statistic is less than the critical value of 1.661.

d. No, since the value of the test statistic is less than the critical value of 1.985.

Here’s the SOLUTION

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What should be the prices of the following preferred stock

What should be the prices of the following preferred stock if comparable securities yield 7 percent ? Why are the valuations different ?

a. MN Inc., $8 preferred($100 Par)

b. CH Inc., $8 Preferred($100 Par) with mandatory retirement after 20 years

Repeat the above problem but assume the comparable yields are 10 percent

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Desmond Corp. purchased 5, $1,000, 5​% bonds of Geotherm Corporation

Desmond Corp. purchased 5, $1,000, 5​% bonds of Geotherm Corporation when the market rate of interest was 14​%. Interest is paid semiannually on the​ bonds, and the bonds will mature in four years.

Using the PV function in Excel Superscript @, compute the price Desmond paid​ (the present​ value) on the bond investment.​

(Assume that all payments of interest and principal occur at the end of the period. Round your answer to the nearest​ cent.)


Desmond paid how much $ on the bond investment?

Here’s the SOLUTION

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Sauer Milk Inc. wants to determine the minimum cost of capital point

Sauer Milk Inc. wants to determine the minimum cost of capital point for the firm. Assume it is considering the following financial plans:

 Cost

(aftertax)Weights  Plan A        Debt 6.0% 25%  Preferred stock 12.0  15   Common equity 16.0  60   Plan B        Debt 6.6% 35%  Preferred stock 12.6  15   Common equity 17.0  50   Plan C        Debt 7.0% 45%  Preferred stock 19.7  15   Common equity 15.5  40   Plan D        Debt 17.0% 55%  Preferred stock 20.4  15   Common equity 17.6  30

a-1. Compute the weighted average cost for four plans. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Weighted Cost  Plan A %   Plan B %   Plan C %   Plan D %

a-2. Which of the four plans has the lowest weighted average cost of capital?   Plan APlan BPlan CPlan D

b. What is the relationship between the various types of financing costs and the debt-to-equity ratio?  All types of financing costs increase as the debt-to-equity ratio increases.All types of financing costs decrease as the debt-to-equity ratio increases.

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Reynolds Construction (RC) needs a piece of equipment that costs $200

Reynolds Construction (RC) needs a piece of equipment that costs $200. RC can either lease the equipment or borrow $200 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. RC’s balance sheet prior to the acquisition of the equipment is as follows:

Current assets $300 Debt $400

Net fixed assets 500 Equity 400

Total assets =$800 =$800

a) (1) What is RC’s current debt ratio?

(2) What would be the company’s debt ratio if it purchased the equipment?

(3) What would be the debt ratio if the equipment were leased?

b) Would the company’s financial risk be different under the leasing and purchasing alternatives?

Here’s the SOLUTION

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Noah Gnus is the owner of a newspaper stand in Ottawa

Noah Gnus is the owner of a newspaper stand in Ottawa. He wants to obtain information on the number of copies of the Ottawa Citizen sold each weekday. A random sample 10 weekdays yielded the following data:

135 274 209 399 153 321 261 414 362 269

Compute and interpret an appropriate 90% confidence interval for the mean daily sales for all weekdays. Under what conditions is this interpretation valid?

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Current data provided by the 2010 census indicates that the prevalence

Current data provided by the 2010 census indicates that the prevalence of breast cancer in the US is still on the rise, while the mortality rates have slightly declined over time. A researcher at a local health department conducts an observational study to determine the prevalence in the particular region. The researcher gathers 2,168 participants and confirms 246 cases of breast cancer in her sample.

A) Assuming the census data indicates a national prevalence of 23.5%, conduct a formal statistical test to determine if the prevalence calculated in the researcher’s study differs significantly from the national prevalence level at the alpha value of 0.05.

B) Interpret your results from the hypothesis test conducted in part A).

Here’s the SOLUTION

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