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The FASB in SFAS No. 123, "Accounting for Stock-Based Options," encourages (but does not require) companies to recognize compensation expense based on the fair value of stock options awarded to their employees and managers. Early drafts of this proposal required the recognition of the fair value of the options. But the FASB met opposition from companies and chose to only encourage the recognition of fair value. Recently, however, FASB has revised this standard (SFAS 123R) so as to require recognition of option compensation expense.
Required:
a. Discuss the role you believe the following parties should play in the accounting standard promulgation process:
(1) FASB
(5) Companies (CEO)
(2) SEC
(6) Accounting firms
(3) AICPA
(7) Investors
(4) Congress
b. Discuss which parties likely lobbied for the change from requiring expense recognition to only encouraging the expensing of stock options.
Cheryl Colby, the CFO of Charming Florist Ltd., has created Company's pro forma balance sheet for the next fiscal year. Sales are projected to increase at 10% to the level of $330 million.
Project K costs $52,125, its expected net cash inflows is $12,000 per year for eight years, and its WACC is 12%. What's the project's NPV? What's the project's IRR?
Wald Inc's stock has a required rate of return of 13%, and it sells for $95 per share. Wald's dividend is expected to grow at a constant rate of 7% per year. What is the expected year-end dividend, D1?
XYC Company is issuing preferred stock yielding at 10 percent, and ABC Corp. is planning buying the stock. XYZ's tax rate is 20 percent and ABC's tax rate is 34%.
Describe the goals and structure of bank management, and identify the role of a bank's board of directors.
What type of bond provide a tax advantage to corporations by being deducted primarily in periods where taxes are likely to be paid. (also they have an advantage of not being in default if a coupon payment is omitted due to a lack of earnings.
Describe how financial market participants respond to the Fed's policies.
Demonstrate your understanding of financial concepts by completing the following problems. Where appropriate, show or explain your work. You may use Excel to work the problems.
1 describe the type of financial ratios and other financial performance measures that are used during a ventures
A company faces financial pressures from attempting to increase too rapidly. Which of the following ratios would you expect to be impacted the most by these pressures?
In a slow year, Deutsche Burgers will produce 3.2 million hamburgers at a total cost of 4.2 million. In a good year. It can produce 4.8 million hamburgers at a total cost of 55.4 million. What are the variable and fixed costs of hamburger producti..
A stock has an expected return of 14 percent, its beta is 1.20, and the risk-free rate is 5.8 percent. What must the expected return on the market be?
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