1. Read the attached case study: Harnischfeger Case Study
2. How did Harnischfeger change their accounting for depreciation?
3. How many changes that may influence net income can you identify? Calculate what Harnischfeger's net income would have been in the absence of these changes. (Hint: There's a LOT).
4. In your opinion, why management changed the company's accounting for depreciation? Why management made the other accounting changes you have identified?

10:41 purdue.brightspace.com The following table sets forth all cash compensation paid to each of the Corporation's five most highly compensated executive officers and to all executive officers as a group for services rendered to the Corporation and its subsidiaries during fiscal 1984. Cash Compensation Henry Harnischfeger Chairman of the Board and Chief Executive Officer $ 364,004 William W. Goessel President and Chief Operating Officer 280,000 C. P. Cousland Senior Vice President and group executive, P&H Heavy 210,000 Equipment Jeffrey T. Grade Senior Vice President Finance and Administration and 205,336 Chief Financial Officer Douglas E. Holt President, Harnischfeger Engineers, Inc. 152,839 All persons who were executive officers during the fiscal year as a group (14 persons) 2,159,066 1985 Executive Incentive Plan In December 1984, the board of directors established an Executive Incentive Plan for fiscal 1985 which provides an incentive compensation opportunity of 40% of annual salary for 11 senior executive officers only if the Corporation reaches a specific net after-tax profit objective and it provides an additional incentive compensation of up to 40% of annual salary for seven of those officers if the corporation exceeds the objective. The Plan covered the chairman, president, senior vice presidents; president, Harnischfeger Engineers, Inc.; vice president, P&H World Services; vice president, material Handling Equipment; and secretary. Awards made regarding fiscal year 1984 are included in the Compensation Table above. 6 This document is authorized for use only by Constance Reckowsky in Spring-2020-MGMT-60000-DY1 at Purdue University, 2020. Harnischfeger Corporation 186-160 Exhibit 3 Selected Stock Price and Market Data A. Stock Prices Harnischfeger's Stock Price S&P 400 Industrials Index High Low Close High Low Close January 4, 1985 9 1/8 8 6/8 186.4 181.8 182.2 January 11, 1985 10 6/8 8 7/8 10 5/8 188.2 182.2 182.8 January 18, 1985 11 10 10 4/8 191.9 186.9 191.3 January 25, 1985 11 2/8 10 1/8 11 199.7 191.3 198.6 February 1, 1985 11 5/8 10 7/8 11 2/8 201.8 198.6 200.0 Harnischfeger's stock beta = 0.95 (Value Line estimate) B. Market Data February 1985 Median P/E ratio of Dow Jones Industrials 10.9 Median P/E ratio of Value Line stocks 11.3 Median P/E ratio of machinery industry (construction and mining 10.0 equipment) Prime rate 10.5% 91-day Treasury bill rate 8.4% 30-year Treasury bond yield 11.4% Moody's Aaa corporate bond yield 12.0%