Indi project | Accounting homework help
Indi Project snow123- Scenarios Having just graduated with your MS degree in accounting and financial management, you’re eager to start applying for positions with higher salaries. That is, of course, one reason you decided to earn your master’s degree! Fortunately, you’re one of the top three candidates for a position at Benson, Cundiff, & Gilbert a financial accounting and brokerage firm in the heart of Washington, DC. You’ve always wanted to live in the District, as locals call it. Sasha, the head of Human Resources at Benson, Cundiff, & Gilbert called this morning. After a brief discussion, Sasha says, “in preparation for your third interview you will prepare a financial analysis of financial statements and respond to questions prepared by our Board of Directors. We’ve done this type of interviewing in the past and sometimes more than one candidate is hired: not for the same position but in related jobs. Are you willing to partake in this type of interview?” Without giving it a lot of thought because you didn’t want to sound hesitant, you say “Absolutely; what time and where?” - Steps to Completion:
- Reviewthefinancialstatements,ratios,andOtherInformationforCorporation
A in Appendix A. - Answer the Corporation A Stockholders’ Equity Questions in paragraph format. Do not rewrite the questions in your report.
- Reviewthefinancialstatements,ratios,andOtherInformationforCorporation
Evaluate the strengths and weaknesses of corporate strategies from recent financial performance. Page 1 of 6
Corporation A. Stockholders’ Equity Questions:
- Calculate the average stock return from 20X1–20X3.
- Calculate the standard deviation over this same period.
- Calculate the coefficient of variation over this period.
- Assume that the CAPM holds, the Corporation has a beta of 1.50, and
the 30-year U.S. Treasury bonds sell at an 8% yield. Using the CAPM, calculate Corporation A’s required rate of return. - Calculate the dollar amount of dividends that were declared during 20X3. - Calculate the (intrinsic) value of Corporation A’s stock price at year- end 20X3 using the dividend growth model. - Compare the intrinsic value to the market value of the Corporation A. Explain the difference. - Compare the intrinsic value and market value to the book value of Corporation A’s. Explain the difference. - Prepare the journal entry to record the 20X3 purchase of treasury stock. - Recalculate 20X3 earnings per share, 20X3 current ratio, and 20X3 debt-to-assets assuming Corporation A never purchased treasury stock (i.e., has zero treasury stock at year-end 20X3), and instead left the monies in cash. a. Assumethatmanagementmadeaboldpredictiontoinvestors at year-end 20X2 that 20X3 EPS would be a minimum of $6.50 and that this would confirm the strong growth rate experienced by Corporation A. At the same time, a member of Corporation A’s board of directors complained about the use of capital to purchase Treasury Stock and said that management should reinvest the monies back into Corporation A. Clearly, management believes that the purchase of treasury stock over the past three years increased shareholder value. Required: Who is correct—management or the member of the board? Use quantitative data to support your answer.
xi. There are three parts to this question:
a. Assume that Corporation A wants to purchase 5,000 more treasury shares in early 20X4 and then sell these same 5,000 shares at year-end 20X4 when, at that time, Corporation A believes that the market price will approximate $62 per share (below its year-end 20X3 intrinsic value). Required: All else equal, is this purchase a good use of capital? Page 2 of 6
- Required: Should creditors happy with the decision to purchase the treasury stock?
- Suppose that on January 1, 20X4, Corporation A sells the 1,000 shares of TS purchased in 20X1; Corporation A sold this stock at the market price at year-end 20X3.
Required:
Prepare the journal entry to record this transaction. xii. How does this transaction impact the three financialstatements?
- Reviewthefinancialstatements,ratios,andinformationbelowforCorporation
B in Appendix A. - Answer the Corporation B Capital Budgeting Questions in paragraph format. Do not number or rewrite the questions in your report.