Prominently in the prospectus

Assignment Help Financial Accounting
Reference no: EM13912317

Edward Seymour is a financial consultant to Cornish, Inc., a real estate firm. Cornish Inc. finances and develops commercial real estate such as office buildings and warehouses. The completed projects are then sold as limited partnership interests to individual investors. The real estate firm makes a profit on the sale of these partnership interests. Edward provides financial information for the offering prospectus, which is a document that provides the financial and legal details of the limited partnership offerings. In one of the projects, the bank has financed the construction of a commercial office building at a rate of 10% for the first four years, after which the rate jumps to 15% for the remaining 20 years of the mortgage. The interest costs are one of the major ongoing costs of a real estate project.

Edward has reported prominently in the prospectus that the break-even occupancy for the first four years is 65%. This is the amount of office space that must be leased to cover the interest and general upkeep costs over the first four years. The 65% break-even is very low and thus communicates a low risk to potential investors. Edward uses the 65% break-even rate as a major marketing tool in selling the limited partnership interests. Buried in the fine print of the prospectus is additional information that would allow an astute investor to determine the break-even occupancy will jump to 95% after the fourth year because of the contracted increase in the mortgage interest rate. Edward believes prospective investors are adequately informed as to the risk of the investment.

Is Edward wrong? Is there an ethical concern? Is Edward a savvy business person? Discuss the position Edward is in and support or defend the position. Shouldn't all investors complete their own due diligence? The information is included in the prospectus, isn't this just business?

Follow the minimum requirements for discussion board posts located in the general discussion area. Recall, those are the minimum requirements, more posts are always encouraged.

Reference no: EM13912317

Questions Cloud

Financial statement analysis and current assets : Identify and describe the three tools of financial statement analysis.Perform each of the three types of analysis on Schellhammer's current assets.
How much total interest will you have earned : You invest $1000 in a 5-year savings bond that pays 8% annual interest on the principal. How much total interest will you have earned after 5 years
Analytical case comparative analysis of profitability : Analytical case comparative analysis of profitability and financial leverage measures.
What is the objective of convergence : FASB and IASB have been working on a Convergence Project for over ten years. In a 1-page essay discuss the two standard-setters and the body of standards issued by each. What is the objective of convergence?
Prominently in the prospectus : Edward has reported prominently in the prospectus that the break-even occupancy for the first four years is 65%. This is the amount of office space that must be leased to cover the interest and general upkeep costs over the first four years
Pricing in one market depends : A firm makes two products, x and y. Inverse demand for each shows that pricing in one market depends on sales in the other according to the equation:What bundle of products (x∗ , y∗ ) should the firm produce.
Financial statements of a foreign subsidiary : A translation adjustment must be calculated and disclosed whenever financial statements of a foreign subsidiary are translated into the parent's reporting currency
Explain why operating income is different in parts e and f : Assume that the firm adds another product to its product line and that the new product sells for $20 per unit, has variable costs of $14 per unit, and causes fixed expenses in total to increase to $63,000 per month. Calculate the firm's operating inc..
Explicit costs for the firm : Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property.What are the annual explicit costs for the firm described above.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Why do firms ever ease their credit policies

Since easing credit policy generally lengthens the collection period and worsens the aging schedule, why do firms ever ease their credit policies?

  What is the divisions margin

Gilde Industries is a division of a major corporation. Last year the division had total sales of $23,867,200, net operating income of $3,078,869, and average operating assets of $8,524,000. The company's minimum required rate of return is 15%. What i..

  What was the delta ray brands net income after-tax

Delta Ray Brands Corp. just completed their latest fiscal year. The firm had sales of $17,902,600. Depreciation and amortization was $872,500, interest expense for the year was $807,600, and selling general and administrative expenses totaled $1,510,..

  Jacksons tax depreciation deduction for equipment

Tax Planning for Corporate Taxpayers Jackson Corporation prepared the following book income statement for its year ended December 31, 2013: For 2013, calculate Jackson's tax depreciation deduction for Equipment 1 and Equipment 2, and determine the ta..

  Determine the fair value of the incomplete building

Iidentified an impairment with regard to the equipment and the equipment is accordingly stated at recoverable amount.

  Question mel oconner owns rental properties in michigan

question mel oconner owns rental properties in michigan. each property has a manager who collects rent arranges for

  What data may be considered as fraud risk factors

What data may be considered as fraud risk factors

  Code of professional conduct

According to Rule 101 of the AICPA Code of Professional Conduct, which of the following services requires CPA independence?

  Prepare income statements for the boards division

Prepare income statements for the Boards Division, the Ski Division, and for Skiboards, Inc. The manager of Department Y is responsible for operation of the call center where customers order products from the corporation.

  Cost of goods sold calculations

Show the corrected Cost of Goods Sold calculations for both 2011 and 2012. Consider the errors had not been corrected, in your answer book, in tabular format as shown below show the dollar effect

  Finding the the cash balance at the end of the yearcash

finding the the cash balance at the end of the year.cash flow computations from the following selected data compute the

  What is the amount realized by camille in the exchange

Camille also incurred selling expenses of $100. What is the amount realized by Camille in the exchange?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd