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Enron was one of the world's largest power companies before it went bankrupt in one of the most spectacular financial frauds in history. One aspect of the fraud involved the creation of a separate entity that borrowed a large amount of money and then used the money to acquire facilities, which were then leased and used by Enron. Because Enron owned less than 50 percent of the stock of the separate entity, Enron was not required to include the entity in its consolidated financial statements. This arrangement was attractive to Enron management because the company did not have to report the huge debt held by the entity on its consolidated balance sheet.
The arrangement was deceptive to shareholders and potential investors because they were unaware of this debt, which turned out to be the responsibility of Enron. Recently, the FASB issued a standard requiring companies to include such separate entities in their consolidated financial statements. REQUIRED: Describe the economic entity assumption, and provide reasons why the FASB is requiring the consolidation of such entities. Do you think that the separate entity should have been considered part of the economic entity called Enron? Why?
Determine which method of financing has traditionally made up the majority of external financing by corporations?
A regression was run in Stock B and market proxy portfolio, S&P 500. The regression line is defined as: Y =8.3+1.2X. If risk-free rate is 4%, the market risk premium is 6%, and market return on Stock B is 10.5%,
CSH has EBITDA of $5 million. You feel that an appropriate EV/EBITDA ratio for CSH is 8. CSH has $9 million in debt, $3 million in cash, and 775,000 shares outstanding. What is your estimate of CSH's stock price?
backgroundmergers and acquisitions has become part of the corporate financing world. every day wall street investment
A) How much would you have in one year if you deposited $46 instead? (Round to the nearest cent) B) How much money could you borrow today if you pay the bank $49 in one year? (Round to the nearest cent) C) Should you loan the money to your friend or ..
going to your school has total additional and opportunity costs of 30000 this year and up-front. with 90 probability
If D0 = $2.00, g = 6% and P0 = $40, what is the stock's expected total return of the coming year?
Would you recommend that Alison Nelson franchise The Chocolate Bar within the United States? Explain your answer.
a 1-year long forward contract on a non-dividend-paying stock is entered into when the stock price is 40 and the
What exactly are FELINE PRIDES securities and how are they structured to provide the benefits of both equity and debt. How does the use of these securities create value for CCI.
Your company has been doing well, reaching $1 million in annual earnings, and is considering launching anew product. Designing the new product has already cost $500,000. The company estimates that it will sell800,000 units per year for $3 per unit wi..
NHS Co. issued $350,000 of 10-year bonds payable on January 1. NHS pays interest each January 1 and July 1 and amortizes any discount or premium by the straight-line method. NHS issued the bonds at a price of $430,000 when the market rate was belo..
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