P6-44. Incentives for Earnings ManagementHarris Corporation pays senior management an annual bonus from a bonus pool. The size of thebonus pool is determined as follows.Reported net incomeLess than or equal to $10 million....Greater than $10 million,but less than or equal to $20 million..Greater than $20 million.........Bonus pool$010% of income in excess of $10 million$1 millionREQUIREDa. Assume that senior management expects current earnings to be $21 million and next year'searnings to be $18 million. What incentive does management of Harris Corporation have formanaging earnings?C.b. Assume that senior management expects current earnings to be $17 million and next year'searnings to be $24 million. What incentive does management of Harris Corporation have formanaging earnings?Assume that senior management expects current earnings to be $9.5 million and next year'searnings to be $12 million. What incentive does management of Harris Corporation have formanaging earnings?d. How might the bonus plan be structured to minimize the incentives for earnings management?

Only the first three sub-parts has been solved due to our protocol and authorizing limit.There is an…

Answered: a. Assume that senior management…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter7: Stocks (equity) - Characterstics And Valuation

Section: Chapter Questions

Problem 19PROB

See similar textbooks

Similar questions

24. Given the following information. What will be the net income P 4,000,000 1,800,000 36,000 Sales, net of returns, and discounts Cost of sales Dividend income, net of final tax Business expenses Gain on sale of old equipment Sale of scrap metals Interest income on employee advances Gain on sale of domestic stocks directly to a buyer 1,600,000 100,000 200,000 45,000 10,000 a. P 945,000 О Б. b. P1,000,000 O c.I с. Р 950,000 O d. P 845,000
You have calculated the adjusted profit for the company to be $2,000,000. The tax rate is 25%. Estimated tax paid during the year is $750,000. Employment Tax Credit available (which is non-refundable) is $700,000. The tax refundable for this company is. a.$950,000 b.$200,000 c.$500,000 d.$250,000
JBC Inc. has the following information reported by its chief accountant for the current year: Sales Operating income Total assets Current liabilities Target rate of return Corporate tax rate WACC $4,500,000 $505,000 $2,500,000 $150,000 18% 35% 13% How much is stakeholders' expected return in dollars? O a) $55,500 O b) $22,750 c) $305,500 d) $305,500
1.2. What Is the internlal growth ate (IGR)? interpret. 2) The net income is RO 25,000. Last year's sales were RO 180,000. The total assets represent half (50%) of total sales. The accounts payables represent 10% of total assets. The accruals is RO 2,000 and the notes payables is RO 3,000. The assets and costs vary directly with sales. The firm distributes RO 15,000 dividends. The firm operates at full capacity. If the sales growth rate is 15%, how much external financing is needed? Interpret.
18. Assume the company's monthly target profit is $17,000. The dollar sales to attain that target profit is closest to:A. $387,392B. $635,069C. $671,925D. $993,313
Use the following information for Smith Brothers, Inc: EBIT / Revenue 15.00% Government Tax Rate 35.00% Revenue / Assets 1.80 times Current Ratio 2.40 times EBT / EBIT 0.80 times Assets / Equity 1.90 times Smith Brothers, Inc.'s return on assets (ROA) is closest to: A. 14.04%. B. 14.82%. C. 24.71%. D. 26.68%.
17) Use the data below to answer the question that follows. Corporate Tax Rate Year Revenues Cost of Goods Sold Selling and Admin. Expenses Capital Cost Allowance Accounts Receivable Inventory Accounts Payable Gross Fixed Assets 30% 1 2 3 $330,000 $340,000 $380,000 $110,000 $150,000 $180,000 $50,000 $130,000 $140,000 $11,000 $12,000 $13,000 $40,000 $43,000 $47,000 $35,000 $38,000 $39,000 $15,000 $18,000 $19,000 $100,000 $120,000 $130,000 The cost of goo sold row excludes any depreciation or capital cost allowance. What is the free cash flow generated for year 2? a) $22,300 b) $22,450 c) $22,600 d) $27,250 e) $31,900
Berry Corporation reports the following information. Year 7 Year 6 Cash $14,364 $13,041 5,535 2,970 Net operating working capital Net long-term operating assets 8,424 8,370 Net nonoperating obligations 2,430 1,890 Net operating profit after tax 1,755 1,458 Weighted average cost of capital 7% 7% What is the company's residual operating income (ROPI) for Year 7? Select one: a. $1,636 * b. $961 c. None of these are correct d. $750 e. $1,037
b.) From the given figures relating to Buildwick Construction, the following profitability ratios for the two years: calculate a) Gross Profit Percentage b) Net Profit Percentage c) Return on Capital Employed. End Year (OMR) CurrentYear (OMR) Sales 500,000 120,000 Gross profit 3 45,000 30,000 Net profit 20,000 22,000 1 Capital employed 140,000 200,000 Issued 80 share 180,000 A 170,000 сapital
Calculate, the managerial remuneration from the following particulars of Ankit and Company Ltd. due to managing director of the company at the rate of 5% of the profits. Also determine the excess remuneration paid, if any : 2,00,000 Net Profit Net profit is calculated after considering the following : (i) Depreciation (ii) Tax provision (iii) Directors' fees (iv) Bonus (v) Profit on sale of fixed assets (original cost $20,000 written down value $11,000). (vi) Provision for doubtful debts (vii) Scientific research expenditure (for setting up new machinery) (viii) Managing director's remuneration paid Other information : (a) Depreciation allowable according to the Companies Act, 2013 (b, Bonus liability as per Payment of Bonus Act, 1965 40,000 3,20,000 8,000 15,000 15,500 9,000 20,000 30,000 35,000 18,000
15. Refer to the following financial information of Scholz Company: NOPAT 8,250,000.00 EBITDA 17,725,000.00 Net Income 5,050,000.00 Capital Expenditures 6,820,000.00 After tax capital costs 6,280,000.00 Tax rate 40% Refer to Scholz Company, calculate its EVA. Use 2 decimal places for your final answer.
The following are available for divison X and Y Profit before interest and tax X 185 000 Y172 000 Capital employed X 1 540 000 Y 1 650 000 The cost of capital is 10% comment on the performance of the departments based on a. Return on capital employed b.residual income

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS