Finance Case Study

10. Gains/Losses are "generally" recorded at the same amount for both Capital Accounts and Tax Basis.

Target Corporation was founded in 1902 in Minneapolis as the Dayton Dry Goods Company, though the first Target store was opened in 1962 in nearby Roseville, Minnesota. Not until 1995, was the first Super Target was built. In 1999 Target launched their website Target.com. Target grew and eventually became the largest division of Dayton Hudson Corporation, culminating in the company being renamed as Target Corporation in August 2000. The Corporation became a major retailing power house with $52.6 billion in revenues from 1,397 stores in 47 states by 2005. Realizing a 12.1% sales growth over the past five years target had announced plans to continue its growth by opening

Finally, in order to complete a more accurate comparison between the two projects, we utilized the EANPV as the deciding factor. Under current accepted financial practice, NPV is generally considered the most accurate method of predicting the performance of a potential project. The duration of the projects is different, one lasts four years and one lasts six years. To account for the variation in time frames for the projects and to further refine our selection we calculated the EANPV to compare performance on a yearly basis.

Maria defers $100 of gain realized in a section 351 transactions. The stock she receives in the exchange has a fair market value of $500. Maria 's tax basis in the stock will be $400.
True

The $5,000 stock trading loss that Spouse B incurred would be a capital loss. But only $3,000 of the loss will be able to be deducted in the current year, the other $2,000 will be a loss carryover.

Date: Name: ID: Answer the following Questions: 1. Tower Inc. owns 30% of Yale Co. and applies the equity method. During the current year, Tower bought inventory costing $66,000 and then sold it to Yale for $120,000. At year-end, only $24,000 of merchandise was still being held by Yale. What amount of inter-company inventory profit must be deferred by Tower? A. $6,480 B. $3,240 C. $10,800 D. $16,200 E. $6,610 2. All of the following statements regarding the investment account using the equity method are true except A. The investment is recorded at cost B. Dividends received are reported as revenue C. Net income of investee increases the investment account D. Dividends received reduce the investment account E.

Accounts receivable (net) increased by $500,000 during the year. This increase has what effect on cash flow?

Decrease an asset and increase another asset. Credits decrease an asset and increase another asset.

- A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,200 and other assets of $10,800. Equity is worth $12,000. The firm has 750 shares of stock outstanding and net income of $775. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?

Second City Options (SCO) is a small firm that specializes in option trading. Employing 35 people, SCO is located on LaSalle Street in the Chicago financial district. It is a member firm of the Chicago Board Options Exchange (CBOE), where it trades options on stocks and stock indices. It is also a member firm of the Chicago Mercantile Exchange Group (CME Group), where it trades options on futures and the underlying futures contracts.

We are providing below the assumptions and other calculations we used while computing the WACC and the cash flows.

Because firm value will rise to $6,850.8 million immediately after the recapitalization announcement, original shareholders will capture the full benefit of interest tax shield since they are able to sell their stocks at a higher price. The new stock price is determined by dividing the value of the levered firm by the number of shares outstanding at the end of 1998. Since there were 185, 516,055 shares outstanding at year end 1998, the new stock price after the announcement of recapitalization would be $6,850.8 million divided by 185, 516,055, which is $36.93. Compared to the

Banks like Lehman’s Brothers and Nothern Rock faced weak balance sheets which made them not able to keep their finances.

As mentioned above, when an asset is sold it may be sold in excess of the owner’s basis. When this occurs the taxpayer may be taxed on the gain at the more favorable capital gains rate (typically around 15%). What was not discussed in prior modules, was the treatment of capital gains for corporations, treatment of capital losses for both individuals and corporations, and how the length of ownership impact the classification and tax treatment of assets upon their sale.

1. An international bank loaned money to an emerging country a few years ago. Because of the nonpayment of interest due on this loan, the bank is now negotiating with the borrower to exchange the loan for Brady bonds. The Brady bonds that would be issued would be either par bonds or discount bonds with the same time to maturity.