1. A North Dakota telecommunication company sold the contractual right to a 5-year supply of transmission capacity to another telecommunication company in an all-cash transaction. The price was deliberately set above fair market value. The buyer, located in San Jose, California, in turn sold an equivalent amount of 5-year transmission capacity to the North Dakota telecommunications company at an equally inflated price in an all-cash transaction. Answer all of the questions below.

1. Does this affect the North Dakota companies net cash flow?
2. Does it affect the North Dakota companys reported assets?
3. Does it affect the North Dakota companys net income in the year of sale?
4. Does it affect the North Dakota companys long-term profitability?
5. Why do you think that this company entered into this transaction?
6. Would you describe this transaction as a round-trip transaction? Why or why not?