Evaluate the strengths and weaknesses of corporate
strategies from recent financial performance.
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Corporation A. Stockholders’ Equity Questions:
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?
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xii. How does this transaction impact the three financialstatements?
Corporation B. Capital Budgeting Questions:
1) Calculate the weighted average cost of capital for Corporation B as of year- end 20X3.
Corporation B purchased equipment in order to facilitate the processing of its product (with the intent ofexpanding its revenue) over the next few years. At the end of this project (end of 20X7), a supplierwill begin to take over the processing of this product. A few facts about the purchase are listed below:
Based on this information, Corporation B prepared the Projected Balance Sheet and Projected Income Statement for this project, which can be found in Appendix A.
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flows by year, andfor 20X4, separately calculate the cash flows that occur at the beginning and end of the year. You will have five cash flow calculations:
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Read the grading rubric before beginning the project to fully understand the requirements; ask questions about the requirements if needed.
Read this project file until you fully understand the requirements.
Use the financial ratio resources in the Week 2 module along with external resources.
Use spell check before submitting your final version.
Submit the deliverable on or before the due date.
Review the Late Policy, which will be strictly enforced. It is located in Learning Resources/Late Policy.
Ask your professor questions as needed.
Adapted from “An Integrated Approach to Beginning Financial Accounting and Finance Courses,” by McWilliams, V. B., & Peters, M. F., 2012, Issues in Accounting Education, 27(1), p. 299–336. Copyright 2012 by the American Accounting Association.
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McWilliams, V. B., & Peters, M. F. (2012). An Integrated Approach to Beginning Financial Accounting and Finance Courses. Issues in Accounting Education, 27(1), 299–336.
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