Chapter 3, Problem 26E

Tommy Gunn is a division manager for K-Cern Inc., a small pharmaceutical company. Tommy's division has been working on a new drug that has the potential to revolutionize the treatment of skin cancer. Once the drug is proven to be effective in clinical trials, it will be approved for sale by the government and patented by the company. Because of the potential market for this drug, it is highly likely that the company's revenues and net income will increase significantly when it is approved. Tommy recently saw an internal company memo indicating that the drug passed its final clinical trial and that the company has received government approval to sell the drug. The company will issue a press release announcing this news in the next two days, and this announcement is expected to result in a dramatic increase in the company's stock price. Tommy knows that there is “free money” to be made if he invests in the stock before the announcement is made. However, K-Cern has a strict policy against…

Tommy Gunn is a division manager for K-Cern Inc., a small pharmaceutical company. Tommy's division has been working on a new drug that has the potential to revolutionize the treatment of skin cancer. Once the drug is proven to be effective in clinical trials, it will be approved for sale by the government and patented by the company. Because of the potential market for this drug, it is highly likely that the company's revenues and net income will increase significantly when it is approved. Tommy recently saw an internal company memo indicating that the drug passed its final clinical trial and that the company has received government approval to sell the drug. The company will issue a press release announcing this news in the next two days, and this announcement is expected to result in a dramatic increase in the company's stock price. Tommy knows that there is “free money” to be made if he invests in the stock before the announcement is made. However, K-Cern has a strict policy against…

A close friend of your father has a medium-sized firm with about 400 employees. You overheard him mention to your father that he was considering "taking the firm public" in order to access more money for expansion. He suggested your father invest in the company at that time. Since you are a finance major your father asked you later what you thought about the opportunity and exactly what was involved in "taking the firm public." What financial statements would he need to provide to potential investors? Would it be better for him to issue a bond? explains the process involved in "taking a firm public" and issuing common stock that will then be traded on an organized exchange?

A software company in Barbados is organizing a competition, inviting business ideas that promote the use of smartphone technology to conduct business. You enter your business plan, an initiative to involve unemployed teenagers and young adults from local communities to generate business and employment, and it was so well received that you were awarded a special prize of 50,000 Barbados dollars. You plan on using your prize money to implement your idea. Identify key decisions you need to make, the information you require to make these key decisions, and the five major business processes you need to engage in.  b. Identify the external parties with whom you would need to exchange information and specify the information you will receive from these parties and the information that you will send to these parties.

Imagine that you are a financial manager researching investments for your client. Think of a friend or a family member as a client. Define their characteristics and goals such as an employee or employer, relatively young (less than 40 years) or close to retirement, having some savings/property, a risk taker or risk averter, etc. Next, use Nexis Uni at the Strayer University library, located at Nexis Uni, click on “Company Dossier” to research the stock of any U.S. publicly traded company that you may consider as an investment opportunity for your client. Your investment should align with your client’s investment goals. (Note: Please ensure that you are able to find enough information about this company in order to complete this assignment. You will create an appendix, in which you will insert related information.) Provide a rationale for the stock that you selected, indicating the significant economic, financial, and other factors that led you to consider this stock. Suggest the…

Your client Ben is in his late 30s (married, with two kids) and working as a full-time doctor in ZZ hospital. He deposited all this money in the bank, but the interest rate is decreasing all the time. He heard that the return of stock investment is much higher. As he knows one medicine company very well, he plans to open a stock account and invest all his money in that company first. Subsequently as he gets to know other medicine companies, he planned to diversify his portfolio into those companies. Appraise Ben’s investment plan.

Once upon a  time,  there was an amazing group of  students who  studied at Cronfwoman University.   News had spread about how good these students were – both at school work, and at working with each  other.  They chit‐chatted with  their neighbors in class, collaboratively worked with  them and shared  many a smiles with them.  The amazing students were approached by an investor, Ms Finn Ance Major,  who asked for their help.  The investor was contemplating setting up a Sandwich Shop at the University  and wondered if that was a good investment.    What is your recommendation to Ms Finn Ance Major?  Here is some information to get you started:  1. The Sandwich Shop will sell made‐to‐order cold and hot sandwiches, and non‐alcoholic beverages  only  2. The University has an intake of 6,000 students  for  the 3‐year Undergraduate program and 1,000  students for the 2‐year Master’s Program per year  3. There are a 4 other food options on campus  – but none of these offer sandwiches   4.…

You are a CPA and a client has come to you for advice. Mount Rock University has a School of Business. They offer a business degree and have hired full time professors to teach there. The university is seeking to take classes online as a way to expand their brand. Right now all of the online professors will be adjunct professors. Your client is a supervisor at a university that hires professors to teach part-time as adjuncts. Most of the adjuncts will teach between 5-10 classes online each year with each class lasting 8 weeks. The adjuncts will receive a separate contract for each class and get paid $5,000 for each class.  The university will enter into an agreement with various professors that teach in their school of business. Here is what the university will offer and here is what the professor is responsible for in the agreement. The university will provide outline of course material to be covered, set up certain timing requirements so that students can view the classes by set days…

Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufacturessophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which isprivately owned, has approached a bank for a loan to help it finance its growth. The bank requires financialstatements before approving such a loan. You have been asked to help prepare the financial statements andwere given the following list of costs:1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory employees.11. Depreciation on chairs…