...M International
Date: June 15, 2015
Prepared by: Fiona Wong
Reviewed by: Professor Amanda Hurley
ISSUE: Accounting for M International’s loss contingency for a verdict overturned on appeal.
BRIEF BACKGROUND OF COMPANY
W Inc, “W”, is a competitor of M International, “M”. In 2007, W filed a claim against M for patent infringement. By the end of that year, M estimated a $15-20 million loss, with $17 million being the most likely. On September 2009, a jury determined M has to pay $18.5 million in damages. Two months later, M filed an appeal to overturn the jury’s verdict. In December 2010, the Court of Appeals ruled in favor of M and overturned the $18.5 million judgment. W filed a petition for a re-hearing in January 2011, but the matter was closed in February, after the appellate judges declined the petition.
ACCOUNTING QUESTIONS
1. When the patent infringement case was filed in 2007, should a liability be recorded? If so, how much?
2. Should M adjust the previously recorded liability after a verdict is decided? Should the adjustment be recorded in 2009 or a prior period?
3. Should M record the reduction of the previously recorded loss contingency in 2010 or 2011?
SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS
1. The amount is probable and there is a best estimate, $17 million will need to be accrued at the end of 2007, with a disclosure indicating the maximum loss of $20 million.
2. M should adjust the previously recorded liability in 2009 because that is the period...

...FINANCE 402 FALL 2014 HOMEWORK #6 Due November 20, 2014
1. BMA Chapter 18 – Questions 12 and 21 at the end of the chapter on pages 468-469.
Q12. Compute the present value of interest tax shields generated by these three debt issues
Consider corporate taxes only. The marginal tax rate is 35%.
a. $1000, one-year loan, at interest rate of 8%
(tax shield) = (tc x i x D) = (0.35 x 0.08 x $1,000) = $28
PV(tax shield) = $28/(1+i)^1 = $25.93
b. A five-year loan of $1000 at 8% interest rate. No principal is repaid until maturity.
Tax Shield = tc x i x D = (0.35 x 0.08 x $1,0000) = $28
Year 1 = PV(tax shield) = $28/(1+0.08)1 = $25.93
Year 2 = PV(tax shield) = $28/(1+0.08)2 = $24.00
Year 3 = PV(tax shield) = $28/(1+0.08)3 = $22.23
Year 4 = PV(tax shield) = $28/(1+0.08)4 = $20.58
Year 5 = PV(tax shield) = $28/(1+0.08)5 = $19.06
PV(tax shield – 5 years) = $111.80
c. A $1000 perpetuity at an interest rate of 7%
PV(tax shield) = tc x D = ($1000 x 0.35) = $350.00
. “I was amazed to find that the announcement of a stock issuance drives down the value of the firm by 30%, on average, of the proceeds of the issue. That issue cost dwarfs the underwriter’s spread and the administrative costs of the issue. It makes common stock issues prohibitively expensive.”
a. You are contemplating a $100 million stock issue. On past evidence, you anticipate that announcement of this issue will drive down stock price by 3% and that the market value of your firm will fall by 30% of the...

...
Human Resources Brochure
Team B
HRM/300
November 27, 2013
Linda McKee
Human Resources Brochure
In 1992 Hancock Manufacturing started producing and distributing medical devices intended for the therapeutic market in the medical industry. Hancock’s main focus of business included devices for hip and knee replacements in the United States. The company’s newly devised strategic plan reaches out to new technologies and global expansion. The human resources management (HRM) department entails assisting Hancock manufacturing in their direction of the strategic plan. The HRM department consists of several functions requiring different sets of skills. These functions include staffing, training and development, compensation and benefits, diversity, employee relations, and maintenance. The strategic plan includes outsourcing the legal function to a firm experienced in international manufacturing laws. The HRM department’s priority is to focus on addressing changes in technology, diversity, globalization, and ethics to ensure Hancock manufacturing’s new direction is successful.
Technology
Hancock manufacturing strives to stay abreast of new technologies in the medical field. Hancock has invested millions of dollars in manufacturing equipment for bio-engineered prosthetics. Biomedical engineering requires the application of engineering principles and design concepts to medicine and biology. Technology breakthroughs such as 3-D printing and...

...
1. (TCO A) Use future or present value techniques to solve the following problems.
(Note: You can use tables or a financial calculator. If you use a calculator, please provide the inputs you used to solve the problems.) (5 points each = total 20 points)
a. Starting with $20,000, how much will you have in 20 years if you can earn 5% on your money?
b. If you inherited $100,000 today and invested all of it in a security that paid an 8% rate of return, how much would you have in 15 years?
c. If the average new home costs $200,000 today, what will be the value in 10 years if inflation is 4% per year?
d. If you can earn 9% per year, how much will you have to save each year if you want to retire in 40 years with $3 million?
(Points : 20)
Question 2. 2. (TCO A) Construct a balance sheet for the Smith family from the following information. Be sure the format is correct. (20 points for balance sheet)
Are the Smiths solvent or insolvent? Explain. (5 points)
Show all work. (25 points total for problem)
Cash on hand 100
Bank credit card balance1 5,000
Auto loan balance 25,000
Mortgage 225,000
Primary residence (FMV) 250,000
Jewelry 500
Stocks 1,000
Coin collection 1,500
2010 Toyota 25,000
(Points : 25)
Question 3. 3. (TCO B) Part 1: The Smith family...

...Chapter 6: Discussion Question #4 (p. 223)
4. Why is it usually easier to forecast sales for seasoned firms in contrast with early-stage ventures?
Typically, it is easier to forecast a seasoned firm’s sales to that of an early-stage venture because the seasoned firm will have an operational history. Basing current sales on historical data is easier to do than trying to estimate sales based on little to no historical data to benchmark from. If you are a start-up / early-stage venture and you are tasked with forecasting sales, competitors’ operational histories and past sales data could possibly be used as a helpful reference. However, if you are the first of your kind, it will be especially difficult to predict / forecast sales or financials as there is nothing for you to use as a benchmark guide.
Chapter 6: Pharma BioTech Mini Case (pp. 229-230, Part A only)
Pharma Biotech is interested in developing an initial “big picture” of the size of financing that might be needed to support its rapid growth objectives for 2011 and 2012.
A. Calculate the following financial ratios (as covered in Chapter 5) for Pharma Biotech for 2010: (a) net profit margin, (b) sales-to-total-assets ratio, (c) equity multiplier, and (d) total-debt-to-total-assets. Apply the return on assets and return on equity models. Discuss your observations.
Net Profit Margin (NPM) = Net Income / Net Sales
NPM = 960 / 15,000 (in thousands)
NPM = 6.4%
Sales-to-total-assets (STTA) = Net...

...1. What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.
PV=190.46 (SEE EXCEL FILE ATTACHED)
2. We sometimes need to find out how long it will take a sum of money (or something else, such as earnings, population, or prices) to grow to some specified amount. For example, if a company’s sales are growing at a rate of 20% per year, how long will it take sales to double?
It would take about 3.801784 years before the sales double. (SEE EXCEL FILE ATTACHED)
3. Will the future value be larger or smaller if we compound an initial amount more often than annually— for example, every 6 months, or semiannually—holding the stated interest rate constant? Why?
It will be larger because it’s basically like adding on interest on top of interest as the frequency increases.
4. What is the effective annual rate (EAR or EFF %) for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
EAR = (1 + Nominal Interest/Number of Period) ^Number of Period -1
SEMI ANNUALLY= (1+.12/2)^2-1=12.36%
QUARTERLY= (1+.12/4)^4-1=12.55%
MONTHLY= (1+.12/12)^12-1=12.68%
DAILY= (1+.12/365)^365-1=12.75%
5. Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later?...

...HWFIN 3331
Chapter 9
9.1. Warr Corporation just paid a dividend of $1.50 a share (that is, D0 = $1.50). The dividend is expected to grow 7% a year for 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years?
D0 = $1.50; g1-3 = 7%; gn = 5%; D1 through D5 = ?
D1 = D0(1 + g1) = $1.50(1.07) = $1.6050.
D2 = D0(1 + g1)(1 + g2) = $1.50(1.07)2 = $1.7174.
D3 = D0(1 + g1)(1 + g2)(1 + g3) = $1.50(1.07)3 = $1.8376.
D4 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn) = $1.50(1.07)3(1.05) = $1.9294.
D5 = D0(1 + g1)(1 + g2)(1 + g3)(1 + gn)2 = $1.50(1.07)3(1.05)2 = $2.0259.
9.2. Thomas Brothers is expected to pay $0.50 per share dividend at the end of the year (that is, D1 = $0.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, Rs, is 15%. What is the stock’s value per share?
D1 = $0.50; g = 7%; rs = 15%; P(hat) 0 = ?
9.14. Microtech Corporation is expanding rapidly, and it currently needs to retain all of its earnings, hence it does not pay any dividends. However, investors expect Microtech to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly – at a rate of 50 percent per year – during Years 4 and 5. After Year 5, the company should grow at a constant rate of 8 percent per year. If the required return on the stock is 15 percent, what is the value of the stock today?
Solution:...

...1. What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.
PV=190.46 (SEE EXCEL FILE ATTACHED)
2. We sometimes need to find out how long it will take a sum of money (or something else, such as earnings, population, or prices) to grow to some specified amount. For example, if a company’s sales are growing at a rate of 20% per year, how long will it take sales to double?
It would take about 3.801784 years before the sales double. (SEE EXCEL FILE ATTACHED)
3. Will the future value be larger or smaller if we compound an initial amount more often than annually— for example, every 6 months, or semiannually—holding the stated interest rate constant? Why?
It will be larger because it’s basically like adding on interest on top of interest as the frequency increases.
4. What is the effective annual rate (EAR or EFF %) for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
EAR = (1 + Nominal Interest/Number of Period) ^Number of Period -1
SEMI ANNUALLY= (1+.12/2)^2-1=12.36%
QUARTERLY= (1+.12/4)^4-1=12.55%
MONTHLY= (1+.12/12)^12-1=12.68%
DAILY= (1+.12/365)^365-1=12.75%
5. Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later?...