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- Question 7.14 Page 571. Accounting for stock-based compensation Historically, technology firms have been the most aggressive users of stock-based compensation in the form of stock options granted to almost all employees of the firms. What is the rationale for offering stock options as compensations? Why has this form of compensation been particularly popular with technology firms in the past?Imagine you work for a company that uses gainsharing. Do you think you would like it? Why or why not? ch14Q1 Which of the following(s) is (are) correct for IPO underpricing? I. 'Winner's Curse' is one of the proposed arguments to explain the underpricing. II. On average, Underpricing can be seen in all industries and IPO sizes. III. Without underpricing, companies could raise more funding. Only I and II Only II and III Only I and III I, II and III Only I Q2 Hanover Tech is currently an all equity firm that has 320,000 shares outstanding with a market price of €24 a share. The current cost of equity is 15.4 per cent and the tax rate is 36 per cent. The firm is considering adding €1.2 million of debt with a coupon rate of 6 per cent to its capital structure. The debt will be sold at par value. What is the levered value of the equity? Show your steps. Q3 Changes in capital structure benefit the shareholders if and only if the value of the firm increases. True False
- Why are we talking about ethics, anyway? Why isn't the law enough to constrain people in organizations? Only typed AnswerA5 2 2. What are three plausible reasons for underpricing in an IPO?10. A company would repurchase its own shares for all of the following reasons except if it a.believes the shares are overvalued. b.wishes to increase the earnings per share. c.wishes to prevent unwanted takeover attempts. d.needs the shares for employee bonuses.
- ! Required Information Ch06 Predecessor-Successor Auditor Communications [LO6-2] Predecessor-Successor Auditor Communications Read the case, then answer the questions that follow. Audit standards require successor auditors to attempt to communicate with the predecessor before accepting an audit engagement. CONCEPT REVIEW: Audit standards require successor auditors to attempt communication with the predecessor auditors. The predecessors must have permission from the previous client before sharing Information with the successor auditors. Predecessor auditors will help successor auditors to determine whether or not to accept an engagement. Part 2 - Concept Check 1. Successor auditors need to communicate with predecessor auditors. 2. accepting the engagement. must ask management to authorize the predecessor auditors to discuss confidential information. 3. If predecessor auditors refuse communication, successor auditors accept the engagement. 4. Communication between predecessor and…How can a company like Volkswagen improve on their coporate governance?3.9 What effect would the following events be likely to have on the price of Google’s stock? a. A competitor launches a search engine that is better than Google’s. b. The corporate income tax is abolished. c. Google’s board of directors becomes dominated by close friends and relatives of its top management. d. The price of wireless Internet connections in developing countries unexpectedly drops, so more and more people world wide use the Internet. e. Google announces a profit of $10 billion, but investors anticipated that Google would earn a profit of $11 billion.
- 12. Why might a company repurchase its own stock? A) It believes that the market undervalues its shares B) To offset dilutive effects of employee stock options granted C) To recognize an economic gain when the treasury shares are later sold for a profit D) To improve earnings per share by reducing the denominator E) All of the aboveProblem 13-5 (Algo) Bonus compensation; algebra [LO13-3] Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 15% of the division's net income. Division income in 2024 before the bonus and income tax was $125,000. The tax rate is 30%. Required: 2. Calculate the amount of the bonus. 3. Prepare the adjusting entry to record the bonus compensation. 4. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 15% of the division's income before tax, but…◦Do firms have any responsibilities to society at large? ◦Is stock price maximization good or bad for society? ◦Should firms behave ethically? Is stock price maximization the same as profit maximization?