# The shareholders of Flannery Company have voted in favor of a buyout offer from Stultz Corporation. Information about each firm is given here:

The answer is "$4.311". Explanation: Calculating the EPS after the merger: ## Related Questions A process that produces computer chips has a mean of .04 defective chip and a standard deviation of .003 chip. The allowable variation is from .03 to .05 defective. a. Compute the capability index for the process. b. Is the process capable? ### Answers Answer: A. 1.111 B. The process is not capable Explanation: Part A Capacity index help todetermine the performance of a process and how it could perform in the future. A capacity index of above 1.33 means that the process is capable but a capacity index below 1.33 means that the process is not capable. The capacity index can be calculated using equation 1; From the mean which is 0.5, it can be determined that the process is a centered process. For centered process, the mean = 0.5 x (Upper s. - Lower S.) = 0.5 x 0,02 = 0.04 so the capacity index for centered mean will be used ................................................1 Given standard deviation = 0.003 upper specification = 0.05 lower specification = 0.03 Therefore the capacity index of the process is 1.111 Part B The capacity index of the process is 1.111 and it is less than 1.33, this means that the process is not capable. Financing that individuals or institutions have provided to a corporation is: Multiple Choice always classified as a liability. classified as a liability when provided by creditors and as stockholders' equity when provided by owners. always classified as equity. classified as a stockholders' equity when provided by creditors and a liability when provided by owners. ### Answers Answer: classified as a liability when provided by creditors and as stockholders' equity when provided by owners Explanation: Corporate finance can be explained as how the revenue, asset as well as is been taken care of in business. The financing could be by individual or institution. It should be noted that Financing that individuals or institutions have provided to a corporation is classified as a liability when provided by creditors and as stockholders' equity when provided by owners The product-variety externality is associated with the A. consumer surplus that is generated from the introduction of a new product. B. loss of consumer surplus from exposure to additional advertising. C. producer surplus that accrues to incumbent firms in a monopolistically competitive industry. D. opportunity cost of firms exiting a monopolistically competitive industry. ### Answers Answer: A. consumer surplus that is generated from the introduction of a new product. Explanation: The product-variety externality is defined as consumer get the surplus that is generated from the introduction of a new product and entry of a new firm conveys a positive externality on consumers. It arises as new firms offer products that differ from those of the existing firms, however, it does not happen under perfect competition. Competitive market lead to efficient outcomes, unless there are externalities. Duke Energy has 14 coal sites throughout the state of North Carolina. Removing the coal ash from the sites has high costs today and provides possible future benefits. You are tasked with advising the governor of North Carolina on whether to require Duke Energy clean up all of its coal ash sites. The benefit of cleaning up the sites is the reduced risk of a potential spill and the costs associated with a spill.All numbers are in real dollars (inflation corrected) and are expressed in present value terms (no need to discount- this has been done for you). Here are the facts: Cost of cleaning up coal ash sites is$30 million today.
If the coal ash is not cleaned up

a. There is a 10% chance the coal ash ponds flood and causes $70 million dollars in damages. b. There is a 20% chances the coal ash seeps into the ground water causing$100 million in damages.
c. There is a 70% chance the coal ash sites cause no damage to the state of North Carolina.

1. What is the expected benefit of cleaning up the coal ash site (i.e. how much do we expect to avoid in future damages)?
2. What sort of analysis would you undertake to advise the governor? Would you recommend the governor require Duke clean up the coal ash sites? (no need to complete calculation, just write the formula used for decision making)?

1) expected benefits of cleaning up coal ash site is $27 million 2) The expected benefits of cleaning the site are less than the costs of cleaning them ($30 million cost > $27 million benefits). But the problem is that the cleaning costs will be covered by Duke Energy today, but in the future, there is a risk that the costs will be covered by the state government. Companies are not eternal and even industry leaders like Kodak, Sears, Toys R Us, Radio Shack, GM, etc., have gone bankrupt. The difference between the costs and the benefits is not that large to risk the state government having to pay for the cleaning costs in the future. Explanation: Costs of cleaning coal ash$30 million

Expected benefits form cleaning coal ash:

• $70 million x 10% =$7 million
• $100 million x 20% =$20 million
• $0 x 70% =$0
• total benefits = $27 million Wade Corp. has 150,000 shares of common stock outstanding. In 2020, the company reports income from continuing operations before income tax of$1,210,000. Additional transactions not considered in the $1,210,000 are as follows.1. In 2020, Wade Corp. sold equipment for$40,000. The machine had originally cost $80,000 and had accumulated depreciation of$30,000. The gain or loss is considered non-recurring.2. The company discontinued operations of one of its subsidiaries during the current year at a loss of $190,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was$90,000 before taxes; the loss from disposal of the subsidiary was $100,000 before taxes.3. An internal audit discovered that amortization of intangible assets was understated by$35,000 (net of tax) in a prior period. The amount was charged against retained earnings.4. The company recorded a non-recurring gain of $125,000 on the condemnation of some of its property (included in the$1,210,000).Instructions Analyze the above information and prepare an income statement for the year 2020, starting with income from continuing operations before income tax. Compute earnings per share as it should be shown on the face of the income statement. (Assume a total effective tax rate of 19% on all items, unless otherwise indicated.)

The net income of Wade Corp. for the year 2020 is $808,850. This is calculated by considering income from continuing operations, the loss from discontinued operations, the profits from selling equipment, understated amortization of intangible assets, and the recurring gain. The earnings per share is$5.39, which is calculated by dividing the net income by the number of shares outstanding.

## Income Statement

Income from Continuing Operations before Income Tax: $1,210,000 Income Tax (19%):$-229,900

Income from Continuing Operations: $980,100 Discontinued Operations: (net of tax$190,000)*(1-0.19) = $-153,900 Profit from Selling Equipment: (($40,000 - $80,000 +$30,000)*(1-.19)) = $-6,100 Understated Amortization of Intangible Assets:$-35,000 (This amount is already net of tax).

Recurring Gain: ($125,000*0.19) =$23,750 (Subtract out non-recurring part from Continuing Operations.)

Net Income: ($980,100 -$153,900 - $6,100 -$35,000 + $23,750) =$808,850

## Earnings per Share

Net Income / Number of shares outstanding: $808,850 / 150,000 =$5.39 per Ordinary Share

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$117,000 Explanation: Manufacturing overhead is also known as the production overhead. It can be estimated by the adding the variable manufacturing overhead to the fixed manufacturing overhead. Therefore: Fixed manufacturing overhead is equivalent to the cost of the fixed units (i.e. 15,000 units) =$4*15000 = $60000 Variable manufacturing overhead is equivalent to the cost of the variable units (i.e. 19000 units) =$3*19000 = $57000 Total manufacturing overhead =$60000 + $57000 =$117000