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Amazing Brentwood Inc bought a long-term asset for $100,000. The asset has a 30% CCA rate. At the end of year 5, the firm sold the asset for 25% of its original value.

In the year of 2018, The firm just paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and depreciation is $710.

1. Given this information, determine the value of the terminal loss or recapture at the end of the year.

2. What are the earnings before interest and taxes in the year 2018?

3. What is the after-tax net profit for the year 2018?

The company plans to efficiently maintain the assets in the long run. The average total assets of the firm are $45,000. The firm also plans to cover the solvency ratios in a reasonable manner to seek additional refinancing from the capital providers. The company has 50,000 shares outstanding. The company plans to raise more capital by issuing shares. The company's ROE has been determined to be 10% which is likely to go up in the next year. The company is concerned about the profitability ratios of the company and it is seeking your advice to improve them. The sales of the recent quarter of 2019 have gone down to $5,800 whereas the net earnings are $ 3,200.

The company is planning to expand in the future. It is planning to open one more branch in the Greater Vancouver region. The shareholders, Board of Directors (BOD) and the managers may have a disagreement on its decision though.

4. What is the Asset turnover for the company?

5. Calculate the TIE ratio and also respond whether it is satisfactory or not?

6. How will issuing more shares affect the capital structure of the company?

7. What does the firm need to do to raise its ROE?

8. Calculate the profit margin ratio of the company and comment on the profitability performance of the company.

9. What type of financial decision is the company making with the expansion?

10. The disagreement among the shareholders, BOD and the managers is popularly points to what in finance?

The three equations below are the fundamental equations from the New Keynesian model. Lt = Et 1X i=0 1 2 i 2 t+i + x2 t+i (Loss) xt = Etxt+1 1 (^{t Ett+1) + ut (Euler) t = Ett+1 + xt (pie) ^{t = zt + t + xxt (TR) where Et denotes the expectation conditional on information available at time t, t denotes ination at time t; dened as PtPt1 Pt1 ; where Pt is price at time t, x is the output gap, dened as ^yt ^yf t ; where y denotes output, the superscript f denotes full-employment output, and hats denote percent deviations from the non-stochastic steady state, ^{t is the nominal interest rate, zt is the interest rate target, < 1 is the discount factor, 1 is the intertemporal elasticity of substitution, and are parameters which depend on the underlying structural parameters of the model, and ut = Et^yf t+1 ^yf t is a stochastic error. All level variables should be understood as proportionate deviations from their exible price equilibrium levels, while all rate deviations are dierences in the rate. (a) Explain the meaning of each equation and how the rst three are derived from a model of monopolistic competition with optimization. (b) Assume that ^{t is the policy instrument and solve for the optimal value for zt: [Hint: Substitute equation (TR) into equation (Euler).]Is there a trade-o between stabilizing the output gap and stabilizing ination? Explain intuitively assuming that the monetary authority implements the optimal response you derive. (c) In the Taylor Rule, set zt at its optimal value and set = y = 0: Substitute the interest rate into the demand equation to derive a system in two variables and their expectations. (d) What are the requirements on the roots of the dynamic system for there to be a unique equilibrium? (e) Explain, without solving, how you would choose parameters in the Taylor Rule, x and y to assure a unique equilibrium.

Monetary policy in the overlapping generations model with ex ante heterogeneity Time: discrete, innite horizon, t = 1; 2; 3::: Demography: A mass 2N of newborns enter in every period. Everyone lives for 2 periods except for the rst generation of old people who live for 1 period. Within the population there are two types of household A and B who dier according to their endowments (see below). The population is split exactly in half between the groups. Preferences: for the generations born in and after period 1; Ut(ci 1;t; ci 2;t+1) = ln(ci 1;t) + ln(ci 2;t+1) i = A;B where ci s;t is consumption in period t and stage s of life for type i = A;B individuals. For the initial old generation ~U (ci 2;1) = ln(ci 2;1) for i = A;B Endowments: Except for the initial old, in the rst period of life type A people receive 1 unit of the consumption good and type B people receive 2 units. No one gets any endowment in their second period of life. In period 1 the rst generation of old are endowed with H0 units of money spread equally among them which can be stored but provides no utility in consumption. The money supply grows each period so that the aggregate money supply in period t is H0(1 + )t: The new money transfers occur by helicopter drop (i.e. lump sum) to each old person at the beginning of the period in which they are old. Information: There is complete information with perfect foresight. Solution concept: Competitive equilibrium. Each period there are markets for the con- sumption good and money. Let, pt; be the price for goods in terms of money in period t which is taken as given by every participant. (a) Write out and solve the problem faced by the members of each type in each generation t: Use Md;i t to represent the nominal money demand of each type i = A;B individual born in period t: (Hint: If pt+1 drops out of your rst order condition equation dont worry about it.) (b) Write down the market clearing conditions and dene a competitive equilibrium. (c) We will focus on a steady state monetary equilibrium. Obtain an expression for the transfers made to each household. (d) Solve for money demand in each period in terms of the current price of goods, pt; and the transfer amount. You do not have to solve for pt: (e) Solve for the amount of consumption in each period of life for each generation also in terms of pt and the transfer amount (f) By comparing consumption of type A individuals with that of type B; comment on the extent to which money growth, > 0 has a redistributive eect. Briey interpret the result.

Consider a real business cycle model in which the representative agent chooses capital and and labor to maximize the utility of consumption (c) and leisure ((1 `)) ; where the time endowment is unity and labor is `: u(c; 1 `) subject to stochastic productivity shocks (A). Output (y) is given by y = Ak (1 `)1 ; where the rm rents capital from the household at rental rate r: (a) Write the rms prot maximization problem and solve for the values of the wage (w) and the rental rate (r) : (b) Write the expression for the agents budget constraint using recursive notation (primes for one-period-ahead values) Let the rate of depreciation on capital be : Why cant the representative agent in a closed economy use bonds to smooth consumption? (c) What are the state variables in the consumers optimization problem? Write the value function for the consumer, using recursive notation and take rst order conditions. Write the expression for the envelope condition and write an expression for the Euler equation and one for the labor supply decision. (d) Explain the permanent income theory of consumption. Use this theory to compare the eect of a transitory increase in A on consumption with a permanent increase. (e) Now, consider three dierent specications of utility, each of which is used in macro models. u(c; 1 `) = ln c + (1 `)1 1 > 0; > 1 (BL) u(c; 1 `) = ln c ` (IDL) u(c; 1 `) = ln " c + (1 `)1 1 # (GHH) where (BL) represents the baseline specication, (IDL) is the specication with indi- visible labor, and the (GHH) is due to Greenwood, Hercowitz and Human. Write the equations for the equilibrium relationship between consumption and leisure for each specication. (f) Dene a balanced growth equilibrium. Which, if any, of the specications have a labor- leisure choice which is consistent with balanced growth? Explain. (g) Compare the response of labor supply to a transitory increase in A which raises the wage using the baseline model and the GHH model.

Diamond-Mortensen-Pissarides with on-the-job search Time: Discrete, innite horizon Demography: A mass of 1 of workers with innite lives. There is a large mass of rms who create individual and identical vacancies. The number of vacancies, v; is controlled by free-entry. Preferences: Workers and rms are risk neutral (i.e. u(x) = x). The common discount rate is r: The value of leisure for workers is b. The cost of holding a vacancy for rms is a utils per period. Productive Technology: A rm matched to a worker produces p units of the consump- tion good per period. With probability each period, jobs (lled or vacant) experience a catastrophic productivity shock and the job is destroyed. Matching Technology: In this arrangement, workers are always in the market. Whether they have a job or not does not stop them getting another job. As they can only have one job at a time if an employed worker meets a rm with a vacancy, the worker quits the current job and switches employment to the new rm. Firms cannot commit to paying a higher wage than the current rm. (Wages are determined by Nash bargaining and symmetry will mean they all pay the same wage.) With probability m(v) each period workers encounter vacancies where again v is the mass of vacancies. The function m(:) is increasing concave and m(v) < 1 for all v: Also limv!0m0(v) = 1; lim!1m0(v) = 0; and m(v) > vm0(v): The rate at which vacancies encounter workers is then m(v)=v which is decreasing in v: (Assume that job destruction and matching are mutually exclusive so m(v) + < 1:) Institutions: The terms of trade are determined by generalized Nash bargaining where rms have bargaining power : This will mean that in every match the wage is determined from Vf Vv = [Vf Vv + Ve Vu] where Vf is the value to the rm of having a worker, Vv is the value to holding a vacancy, Ve is the worker value of employment, and Vu is the worker value to unemployment. (a) Let w represent the wage and obtain the ow value or Bellman type equations for workers and rms. (b) Dene a free-entry search equilibrium. (c) Solve for an expression that characterizes equilibrium in terms of the mass of vacancies, v: (d) Under what parameter restriction does a unique interior (i.e. v > 0) equilibrium exist? Explain. (e) Obtain an expression for steady-state unemployment. (f) How does unemployment change with the separation rate, ? Briey explain.