Answer the following
Topic 6 The following is an accounts receivable aging schedule for Caulfield Lid on 30 June 2019. Customer Total Number of days past due 1-30 31-60 61-90 Over 90 Bela 18,000 11,000 7,000 Tom 22,000 22,000 Jason 35,000 15,000 12,000 8,000 Lee 41,000 41,000 Estimated percentage uncollectable 5% 10% 25% 50% At 30 June 2019, the unadjusted balance in allowance for doubtful debts is a credit of $8,000. At 31 March 2020, a debtor named Alan declared bankrupt and unable to pay $500 owing to Caulfield Lid. At 15 May 2020, a cheque for $500 is received from Alan whose account was written-off as uncollectable on 31 March. At 30 June 2020, the unadjusted balance in allowance for doubtful debts is a debit of $500 and the ageing schedule indicates that total estimated bad debts will be $25,000. Required: a) Show the general journal entry to record the adjusting entry at balance day 30 June 2019. b) Show the general journal entry record the events and transactions related to Alan in 2020. c) Show the general journal entry to record the adjusting entry at balance day 30 June 2020.(12 points} Consider the payoff matrix below. The players make their choices simultaneously and without communication between them. The game will be played only once. Each player is aware of the whole payoff matrix. B Firm B A Raise P Hold P Cut P Raise P 20 30 40 Firm A 2D SCI 20 Hold P 4E! 30 5E] 3D 40 40 Cut P '10 2E! 30 2D SCI 10 a. If Firm A decides to raise its price and Firm B decides to cut its price, what is Firm B's payoff? b. Does Firm A have a dominant strategy? If so, what is it? c. Does Firm B have a dominant strategy? If so, what is it? d. Which option raise, hold, cut should Firm A choose? e. Which option should firm B choose? f. Is there a Nash equilibrium in this game? If so, which outcome is it? (Describe the outcome by giving A's option and B's option.) (4 points} How many Nash equilibria could there be, at most, in a game with a 3 x 5 payoff matrix? (El points} Consider the payoff matrix below. Two firms are thinking about offering a new model of their product. There is not enough demand for both firms to have good sales if they both offer the new model. a. What is a value of X that will make this game a prisoner's dilemma prob em? b. As a prisoner's dilemma problem, which outcome is the dominant strategy equilibrium? c. As a prisoner's dilemma problem, which outcome would the firms choose if they could collude? (Assume that the two firms can talk to each other, but they cannot exchange funds for each other's cooperation.) EXERCISE 3 Suppose that a firm has the production function f(r1, (2) = 201 + loge (2 + 1) (a) Does the marginal product of factor 1 increase, decrease, or stay constant as the amount of factor 1 increases? Does the marginal product of factor 2 increase, decrease, or stay constant as the amount of factor 2 increases? (b) This production function does not satisfy the definition of increasing returns to scale, constant returns to scale, or decreasing returns to scale. How can this be? Find a combination of inputs such that doubling the amount of both inputs will more than double the amount of output. Find a combination of inputs such that doubling the amount of both inputs will less than double output.36. (3 Points) A stock has a Beta of 1.4, the risk free rate is 2%, and the expected market return is 9%. What is the expected return on the stock? a. 9.8% b. 11.8% c. 12.6% d. 14.6% 37. (3 points) What are the following call options' prices given the following time premiums if the price of the underlying stock is $55? Option strike price Premium Call at $50 $1.00 Call at $55 2.00 Call at $60 0.50 a. Price of $50 Call b. Price of $55 Call c. Price of $60 Call 38. (4 points) A convertible bond has the following features: Face Value: $1,000 Maturity: 20 years Annual coupon: $70 Conversion Price: $80 a. The bond may be converted into how many shares? b. What is the current value of the convertible as a bond if prevailing interest rates are 6%? c. What is the current value of the convertible as a stock if the current stock price is $82 per share? d. Based on (b) and (c) and assuming a market premium of $30, what should the current price of the bond be? 39. (6 points) W Inc. currently has EPS of $10.00 and a payout ratio of 25%. Analysts predict that the dividend should grow 8% per year for the foreseeable future. The 90 day T Bill rate is 2%. The S&P 500 is expected to return 12% over the next year. ABC has a Beta of 1.3. a. What is the current dividend per share for W? b. Using the CAPM, what is the required return for W? c. Using the above information and the Dividend Growth Model, what is the expected current price of W to the nearest dollar? 40. (3 points) A bond has a 5% coupon and 10 years to maturity, what is its current price if the current market rate is 6%. 41. (3 points) A bond portfolio has a total face value and market value of $1,000,000, an average fixed coupon rate of 6% and average maturity of 9 years. Market rates suddenly increase 2% affecting all bonds in the portfolio equally. Based on the averages of the portfolio, what is the expected loss of market value (to the nearest dollar) of the portfolio resulting from this rate increase? a. No loss b. - $124,938 c. - $134,202 d. - $1,000,000
