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Chapter: 12 -Problem: 2 >> Below is nine months’ return data for Walgreens and the S&P 500.a. Estimate the intercept (alpha) and beta for Walgreens stock using spreadsheet functions.b. Interpret what the slope estimate means to a stock analyst.c. Compute the R-squared of the regression using Excel’s RSQ function. What does the R-squared tell us about the relationship between Walgreens’ returns and those of the market?
Answer Preview: a. Alpha -2 754 Beta 0 340 R squared 0 107 Interpret what the sl…

, Chapter: 11 -Problem: 9 >> A U.S. firm wants to raise $10 million of capital so it can invest in new technology. How much will it need to raise to net $10 million using the average costs of raising funds in the chapter?
Answer Preview: The average cost of raising fun…

, Chapter: 12 -Problem: 4 >> You’ve collected data on the betas of various mutual funds. Each fund and its beta is listed below:Mutual Fund               Beta Weak Fund....................0.23 Fido Fund......................0.77 Vanwatch......................1.05 Temper..........................1.33 a. Estimate the beta of your fund holdings if you held equal proportions of each of the above funds.b. Estimate the beta of your
Answer Preview: a. Beta of portfolio = .25(0 23…

, Chapter: 10 -Problem: 10 >> How does a Treasury Inflation Protected Security (TIPS) bond diff er from the typical U.S. Treasury security?
Answer Preview: The typical U S. Treasury note or bond pays the same coupon interest over its …

, Chapter: 12 -Problem: 2 >> Based upon your answers to Question 1, which asset appears riskiest based on standard deviation? Based on coefficient of variation? Transcribed Image Text: Asset Annual Returns A 5%, 10%, 15%, 4% B -6%, 20%, 2%, –5%, 10% 12%, 15%, 17% D 10%, – 10%, 20%, –15%, 8%, -7%
Answer Preview: The highest standard de…

, Chapter: 12 -Problem: 3 >> What is the coefficient of variation? How is it used as a measure of risk?
Answer Preview: The coefficient of variation is the standard deviation divided by the …

, Chapter: 11 -Problem: 1 >> Determine the intrinsic values of the following call options when the stock is selling at $32 just prior to expiration of the options.a. $25 call priceb. $30 call pricec. $35 call price
Answer Preview: The intrinsic value of …

, Chapter: 8 -Problem: 11 >> Describe the dealer system for marketable U.S. government securities. Dealer A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...
Answer Preview: The dealer system for marketable U S. government securitie…

, Chapter: 6 -Problem: 1 >> What risks does a company face due to changing exchange rates?
Answer Preview: When conducting business globally, selling goods and …

, Chapter: 9 -Problem: 23 >> You have recently seen a credit card advertisement stating that the annual percentage rate is 12 percent. If the credit card requires monthly payments, what is the effective annual rate of interest on the loan?
Answer Preview: Periodic interest …

, Chapter: 12 -Problem: 8 >> Explain the historical relationships between return and risk for common stocks versus corporate bonds. Stocks Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...
Answer Preview: As seen in Table 12 4, higher risk assets generally have hig…

, Chapter: 4 -Problem: 6 >> Assume that banks must hold a 2 percent reserve percentage against transaction account balances up to and including $40 million. For transaction accounts above $40 million, the required reserve percentage is 8 percent. Also assume that Dell National Bank has transaction account balances of $200 million.a. Calculate the dollar amount of required reserves that Dell National Bank must hold.b. What pe
Answer Preview: a. $40 million x .02 = $.8 …

, Chapter: 11 -Problem: 2 >> In late 2014, you purchased the common stock of a company that has reported significant earnings increases in nearly every quarter since your purchase. The price of the stock increased from $12 a share at the time of the purchase to a current level of $45. Notwithstanding the success of the company, competitors are gaining much strength. Further, your analysis indicates that the stock may be over
Answer Preview: Some possibilities include a. Sell the stock, pay tax on capital …

, Chapter: 8 -Problem: 1 >> Assume investors expect a 2.0 percent real rate of return over the next year. If inflation is expected to be 0.5 percent, what is the expected market interest rate for a one-year U.S. Treasury security?
Answer Preview: r = RR …

, Chapter: 11 -Problem: 27 >> Between 2007 and 2014, the costs of unethical behavior in investment banks (fines, lawyer costs, trading losses) were estimated at over $100 billion, about 6.6 percent of industry revenue. Will this be a deterrent?
Answer Preview: Such large fines should be a deterrent, but time will tell. Over the seven year period, …

, Chapter: 10 -Problem: 13 >> What is a round lot of common stock?
Answer Preview: A round lot equals 100 shares. Commis…

, Chapter: 11 -Problem: 3 >> Determine the profit (or loss) to a call buyer and a call writer for the following call options when the stock is selling at $32 just prior to expiration of the options and the option premium is $2.50.a. $25 strike priceb. $30 strike pricec. $35 strike price
Answer Preview: The intrinsic value of a call option is max [0, V X]; the call buyer payoff is max [0…

, Chapter: 11 -Problem: 8 >> The Quad Index is comprised of four stocks: Uno, Dos, Tres, and Fore.a. Given the data below on the number of shares outstanding and their share prices at time (t) and time (t + 1), what is the percentage change in the Quad Index if it is calculated as a price-weighted index? As a value-weighted index? b. Instead of the prices shown above, suppose we switch the prices for Uno and Fore. That is, Un
Answer Preview: a. Stock Number of shares Price at time t Price at time t+1 Uno 1000 $10 $11 Dos 500 $20 $21 Tres 25…

, Chapter: 5 -Problem: 12 >> Trace the effect on bank reserves of a change in the amount of cash held by the public.
Answer Preview: A decrease in the amount of cash held by t…

, Chapter: 9 -Problem: 4 >> Use a financial calculator to solve for the interest rate involved in the following future value of an annuity due problem. The future value is $57,000, the annual payment is $7,500, and the time period is six years. Annuity An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and in
Answer Preview: Enter 57000 and press the FV key. Next …

, Chapter: 9 -Problem: 3 >> What is the present value of a five-year lease arrangement with an interest rate of 9 percent that requires annual payments of $10,000 per year with the first payment being due now?
Answer Preview: Using Present Value of an Annuity Table PVIF r,n = 3 890[from Table 4 in the Appendix…

, Chapter: 10 -Problem: 2 >> Given the information below, compute annualized returns: Transcribed Image Text: Income Purchase Price ????nt Time Asset Price Received Period $ 20 $ 26 18 75 weeeks 3 months 2 years 8 months $2 15 0.40 150 130 3.00 D 3.50 0.20
Answer Preview: a. Total return = ($26 20) + $2 = $8 percentage return in de…

, Chapter: 12 -Problem: 14 >> Define a portfolio, and describe how the expected return on a portfolio is computed. Expected Return The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio A port
Answer Preview: A portfolio is a collection …

, Chapter: 13 -Problem: 2 >> Use your knowledge of balance sheets to fill in the missing amounts: Assets Cash..................................................................$10,000 Accounts receivable........................................100,000 Inventory...........................................................––––––– Total current assets.........................................220,000 Gross plant and equipment.........
Answer Preview: Cash $ 10,000 Accounts payable $ 12,000 Accounts receivable 100,000 Notes paya…

, Chapter: 10 -Problem: 23 >> What is meant by the yield to maturity (YTM) on a bond? Maturity Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Answer Preview: It is the return on a bond investm…

, Chapter: 11 -Problem: 2 >> Determine the intrinsic values of the following put options when the stock is selling at $63 just prior to expiration of the options.a. $55 put priceb. $65 put pricec. $75 put price
Answer Preview: The intrinsic value fo…

, Chapter: 7 -Problem: 21 >> What is a mortgage? What is meant by the term mortgage markets?
Answer Preview: A mortgage is a loan backed by real prope…

, Chapter: 4 -Problem: 7 >> Assume that the Fed decides to increase the required reserve percentage on transaction accounts above $40 million from 8 percent to 10 percent. All other information remains the same as given in Problem 6, including the transaction account balances held by Dell National Bank.a. What would be the dollar amount of required reserves?b. What percentage of total transaction account balances held by Del
Answer Preview: a. $40 million x .02 = $.8 …

, Chapter: 13 -Problem: 26 >> Briefly describe the financial responsibilities undertaken by a firm’s treasurer.
Answer Preview: The treasurer oversees the tra…

, Chapter: 2 -Problem: 12 >> What is deposit money and how it is “backed”?
Answer Preview: Credit money is money backed by th…

, Chapter: 8 -Problem: 3 >> A 20-year U.S. Treasury bond has a 3.50 percent interest rate, while a same maturity corporate bond has a 5.25 percent interest rate. Real interest rates and inflation rate expectations would be the same for the two bonds. If a default risk premium of 1.50 percentage points is estimated for the corporate bond, determine the liquidity premium for the corporate bond. Maturity
Answer Preview: r = RR + IP + DRP + MRP + LP, Where the DRP exists …

, Chapter: 13 -Problem: 5 >> Use your knowledge of income statements to fill in the missing items: Sales Cost of goods sold.......................................$575,000 Gross profit.................................................1,600,000 General and administrative expense.........200,000 Selling and marketing expense...............––––––––– Depreciation...................................................50,000 Operating in
Answer Preview: Assets Cash $25,000 3 4% Accounts receivable $125,000 17 0% Inven…

, Chapter: 2 -Problem: 10 >> What is the difference between full-bodied money and token coins?
Answer Preview: Full-bodied money is defined as co…

, Chapter: 9 -Problem: 24 >> A credit card advertisement states that the annual percentage rate is 21 percent. If the credit card requires quarterly payments, what is the effective annual rate of interest on the loan?
Answer Preview: Periodic interest …

, Chapter: 10 -Problem: 28 >> Lerman Company has preferred stock outstanding. It pays an annual dividend of $10. If its current price is $70, what discount rate will investors use to value the stock? Discount Rate Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financi
Answer Preview: P = Dp/r …

, Chapter: 12 -Problem: 5 >> Using your answers to Problems 4a and 4b, estimate your portfolio’s expected return if the security market line is estimated as E(Ri) = 5.2 + 8.4(????i).a. Estimate the beta of your fund holdings if you held equal proportions of each of the above funds.b. Estimate the beta of your fund holdings if you had 20 percent of your investments in Weak Fund, 40 percent in Fido Fund, 15 percent in Vanwatch
Answer Preview: a. Expected return …

, Chapter: 13 -Problem: 22 >> What are the two main solutions for reducing the adverse effects of agency problems?
Answer Preview: One solution is to align the interests of managers with those of shar…

, Chapter: 13 -Problem: 11 >> What is a statement of cash flows? What are the three standard sections contained in a statement of cash flows?
Answer Preview: The statement of cash flows provides a sum…

, Chapter: 12 -Problem: 3 >> As mentioned, spreadsheets can do the work for us of computing beta. Use Excel’s “slope” function to estimate the beta of Microsoft using the data in Table LE12.1. Use the “intercept” function to estimate the alpha or intercept term of the regression line. Transcribed Image Text: Rates of Product Ma
Answer Preview: S&P 500 Microsoft Return …

, Chapter: 1 -Problem: 10 >> Identify and briefly describe the financial functions in the financial system.
Answer Preview: The three components of the financial system are: a monetary system, financial institutio…

, Chapter: 12 -Problem: 8 >> Stevens Incorporated’s stock has a 14 percent return, a beta of 0.85, and the market return is 15 percent.a. What was the risk-free rate in the economy for the year?b. The stock market of another company had a return of 20 percent. What would you estimate its beta to be?
Answer Preview: a. The security market line is given by: Expected securit…

, Chapter: 13 -Problem: 16 >> Describe the financial goal espoused by business firms.
Answer Preview: The financial go…

, Chapter: 9 -Problem: 9 >> Describe the process for solving for the time period in present and future value problems. Future Value Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...
Answer Preview: If we know the present value, future value, an…

, Chapter: 11 -Problem: 5 >> Currently, the price of Mattco stock is $30 a share. You have $30,000 of your own funds to invest. Using the maximum margin allowed, what is your percentage profit or loss under the following situations (ignore dividends and taxes)? What would the percentage profit or loss be in each situation if margin were not used?a. You purchase the stock and it rises to $33 a shareb. You purchase the stock an
Answer Preview: a. margin: $ 66,000 stock value 30,000 …

, Chapter: 18 -Problem: 28 >> If a firm is eligible to receive tax credits, how might that affect its debt use?
Answer Preview: Tax credits will lower the firms tax bill and t…

, Chapter: 10 -Problem: 4 >> Can only large institutional investors purchase bonds? Explain.
Answer Preview: No. Although institutions such as pension funds, life insurance firms, and mutual funds make …

, Chapter: 17 -Problem: 4 >> Find a project’s IRR and MIRR if it has estimated cash flows of $5,500 annually for seven years, if its year-zero investment is $25,000, and the firm’s minimum required rate of return on the project is 10 percent.
Answer Preview: PVIFA = PV annuity/Annual receipt = $25,000/5,500 = 4 545 n = 7; PVIFA falls be…

, Chapter: 8 -Problem: 9 >> What are the types of marketable securities issued by the Treasury?
Answer Preview: Marketable government securities, as the term implies, are those that may be purchas…

, Chapter: 17 -Problem: 27 >> What is a risk-adjusted discount rate (RADR)? How are RADRs determined for individual projects? Discount Rate Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Answer Preview: A risk-adjusted discount rate raises or lowers a projects discount rate from the …

, Chapter: 9 -Problem: 11 >> What is an ordinary annuity? What is an annuity due? Annuity An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...
Answer Preview: An annuity is a series of equal payments, or receipts, that occur over a …

, Chapter: 11 -Problem: 4 >> Determine the profit (or loss) to a put buyer and a put writer for the following put options when the stock is selling at $63 just prior to expiration of the options and the option premium is $3.a. $55 strike priceb. $65 strike pricec. $75 strike price
Answer Preview: The intrinsic value of a put option is max [0, X V]; the call buyer payoff is max …

, Chapter: 8 -Problem: 18 >> Describe the process by which inflation took place historically before modern times.
Answer Preview: Inflation took place, at times, because the …

, Chapter: 11 -Problem: 7 >> The four stocks below are part of an index. Use the information below:a. Compute a price-weighted index by adding their prices at time t and time t + 1. What is the percentage change in the index?b. Compute a value-weighted index by adding their market values at time t and time t + 1. What is the percentage change in the index?c. Why is there a difference between your answers to (a) and (b)?
Answer Preview: a. Price-weighted index Sum of prices at time t + 1 = $15 …

, Chapter: 9 -Problem: 9 >> Assume you are planning to invest $5,000 each year for six years and will earn 10 percent per year. Determine the future value of this annuity if your first $5,000 is invested at the end of the first year. Annuity An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance comp
Answer Preview: First investment …

, Chapter: 2 -Problem: 12 >> The following problem requires a basic knowledge about probabilities and the calculation of expected values. The problem is more easily solved using Excel spreadsheet software. a. Calculate the dollar amount of the money supply under each scenario or outcome.b. Calculate the expected value of the money supply, taking into consideration each scenario and its probability of occurrence.c. Scenario C
Answer Preview: a. MS x VM = RO x PL MS = (RO x PL)/VM Scenario A:(375,000 x $75)/1 75 = $28,125,000/1 75 …

, Chapter: 8 -Problem: 12 >> What is the tax status of income from federal securities?
Answer Preview: The interest on all federal obligations is now subject to ordina…

, Chapter: 10 -Problem: 1 >> Given the information below, compute annualized returns: Transcribed Image Text: Price Initial Price Time Period 15 months 11 months Income Asset Change $ 2 $ 6 10 $29 40 B 70 30 7 years 24 months 50 20 -8 D
Answer Preview: a. Total return = $2 + $6 = $8 Percentage return = …

, Chapter: 5 -Problem: 3 >> Discuss how the U.S. government influences the economy and how the government responded to the 2007–09 perfect financial storm.
Answer Preview: The federal government plays a dual role in the economy. It provides social and economic services to …

, Chapter: 9 -Problem: 12 >> Describe how the present value of an annuity can be found. Annuity An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...
Answer Preview: Many present value problems also involve cash flow annuities. Usually these are ordinary annuit…

, Chapter: 4 -Problem: 10 >> Identify the seven individuals who served as chairs of the Fed Board of Governors since the early 1950s. Indicate each individual’s approximate time and length of service as chair.
Answer Preview: The seven Fed chairs, along with the period served are: …

, Chapter: 10 -Problem: 25 >> What risk does a zero-coupon bond address?
Answer Preview: Reinvestment rate r…

, Chapter: 4 -Problem: 23 >> Briefly describe and compare the central banks in the United Kingdom, Japan, and Economic Monetary Union.
Answer Preview: The United Kingdoms central bank is the Bank of England which w…

, Chapter: 12 -Problem: 5 >> What sources of risk does a firm face, and which of those sources are reflected on the firm’s income statement?
Answer Preview: Sources of risk that are reflected in the income statement include business risk, excha…

, Chapter: 8 -Problem: 8 >> Find the market interest rate for a debt security given the following information: real rate = 2 percent, liquidity premium = 2 percent, default risk premium = 4 percent, maturity risk premium = 3 percent, and inflation premium = 3 percent. Maturity Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed,
Answer Preview: Nominal Interest …

, Chapter: 13 -Problem: 7 >> Use the following information to construct an income statement: Cost of goods sold...............................................$684,000 Gross profit...........................................................$546,000 General and administrative expense................$159,000 Selling and marketing expense..........................$134,000 Operating income...........................................
Answer Preview: Cost of goods sold = $684,000; Gross profit = $546,0…

, Chapter: 3 -Problem: 17 >> What is meant by bank liquidity and bank solvency?
Answer Preview: Bank liquidity reflects the ability to meet …

, Chapter: 7 -Problem: 26 >> What role did individuals play in the development of the 2007–08 financial crisis?
Answer Preview: Historically, U S. consumers limited their use of debt. However, by t…

, Chapter: 14 -Problem: 15 >> Compute the financial ratios for Eastnorth Manufacturing’s industry. Using Eastnorth’s ratios from Problem 12, graph the firm’s and industry ratios as we have done in this chapter. Analyze Eastnorth’s performance in comparison to its industry. Financial Ratios The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that
Answer Preview: Ratio 2017 2016 2015 Current ratio 2 22 1 95 1 68 Quick ratio 1 30 1 15 0 84 Average payment period …

, Chapter: 9 -Problem: 1 >> Assume you are planning to invest $100 each year for four years and will earn 10 percent per year. Determine the future value of this annuity due problem if your first $100 is invested now. Annuity An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which ins
Answer Preview: Using Future Value of an Annuity Table FVIF r,n = 4 641[from Table 3 …

, Chapter: 14 -Problem: 9 >> What do market value ratios indicate? Identify some market value ratios.
Answer Preview: Market value ratios show the value …

, Chapter: 13 -Problem: 3 >> What is meant by the statement that depreciation provides a tax shield? Explain how this works.
Answer Preview: Depreciation is deducted from taxable inc…

, Chapter: 18 -Problem: 24 >> What is meant by the degree of combined leverage?
Answer Preview: Degree of combined leverage (DCL) i…

, Chapter: 9 -Problem: 5 >> Following are the cash flows for three investments (originally presented in end-of-chapter problem 25) that actually occur at the beginning of each year rather than at the end of each year. a. Find the present values at the end of time period zero for each of these three investments if the discount rate is 15 percent.b. Find the future values of these three investments at the end of year five if
Answer Preview: a. The PV of an annuity due can be solved directly, or by multiplying the PV of an ordinary annuity …

, Chapter: 17 -Problem: 13 >> Describe the payback period method for making capital budgeting decisions. Capital Budgeting Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the... Payback Period Payback pe
Answer Preview: The payback measures how long it …

, Chapter: 3 -Problem: 8 >> Use the data from Problem 7 for Second National Bank and calculate the common equity capital ratio assuming that stockholders’ equity was equal to common equity (i.e., there was no preferred stock).
Answer Preview: Stockholders equity = common …

, Chapter: 14 -Problem: 14 >> Compare the reasons for the changes in return on equity for Eastnorth Manufacturing and its industry.
Answer Preview: The industry ROE increase occurred primarily because of increased p…

, Chapter: 8 -Problem: 2 >> As an economist for a major bank, you are asked to explain a substantial increase in the price level when neither the money supply nor the velocity of money has increased. How can this occur?
Answer Preview: Inflation may be associated with a change in costs, a change in the money …

, Chapter: 14 -Problem: 13 >> Explain how internally generated funds are used to reduce the need for external financing to fund asset investments.
Answer Preview: Internally-generated funds are the additions to …

, Chapter: 8 -Problem: 25 >> What is meant by default risk and a default risk premium?
Answer Preview: Default risk is the risk that a borrower will not pay interest a…

, Chapter: 17 -Problem: 3 >> Lisowski Laptops (LL) is examining the possibility of manufacturing and selling a notebook computer that is compatible with PC and Macintosh systems and that can receive television signals. Its estimated selling price is $2,500. Variable costs (supplies and labor) will equal $1,500 per unit, and fi xed costs per year would approximate $200,000. Up-front investments in plant and equipment will tota
Answer Preview: Price: $2,500 per unit Investment: $270,000 Tax rate: 40% Variable costs: $1,500 per unit Project li…

, Chapter: 11 -Problem: 12 >> Boneyard Biscuits’ Dutch auction for an IPO was a great success. The firm offered 100 million shares. Bids appear below. a. What is the clearing price?b. What options do Boneyard and its underwriters have for allocating shares? How many shares will each bidder receive under each option? Transcribed Image Text:
Answer Preview: a. We compute the cumulative total of shares to determine when offering of 100 million shares is sold out. Bidder Bid price Number of Shares Cumulative number of shares Manahan $25 25 25 million 25 mi…

, Chapter: 15 -Problem: 3 >> Explain how the cash conversion cycle differs from the operating cycle. Cash Conversion Cycle Cash conversion cycle measures the total time a business takes to convert its cash on hand to produce, pay its suppliers, sell to its customers and collect cash from its customers. The process starts with purchasing of raw materials from suppliers,...
Answer Preview: The cash conversion cycle typically is shor…

, Chapter: 3 -Problem: 13 >> Briefly describe the purpose of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. Also, indicate the purpose of the Resolution Trust Corporation (RTC). Corporation A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right
Answer Preview: The Financial Institutions Reform, Recovery, and Enforcement Act (F…

, Chapter: 14 -Problem: 5 >> Following are selected financial data in $ thousands for the Hunter Corporation: a. Calculate Hunter’s rate of return on total assets in 2017 and in 2016. Did the ratio improve or worsen?b. Diagram the expanded DuPont system for Hunter for 2017. Insert the appropriate dollar amounts wherever possible.c. Use the DuPont system to calculate the return on assets for the two years, and determine why th
Answer Preview: a. 2016: $100/$1,000 = 0 10 or 10% 2017: $110/$1,200 = 9 17% R…

, Chapter: 10 -Problem: 21 >> Briefly describe how securities are valued.
Answer Preview: Future cash flows are estimat…

, Chapter: 14 -Problem: 12 >> Below are financial statements for Eastnorth Manufacturing. After computing the ratios we discussed in this chapter, discuss strong and weak points of Eastnorth’s performance. Financial Statements Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the
Answer Preview: Ratio 2017 2016 2015 Current ratio 1 8 2 0 1 63 Quick ratio 0 9 1 0 0 77 Average payment period …

, Chapter: 2 -Problem: 13 >> What are automatic transfer service (ATS) accounts?
Answer Preview: ATS accounts provide for direct deposits to, …

, Chapter: 17 -Problem: 7 >> What kinds of financial data are needed to conduct project analysis?
Answer Preview: Data needed include investment costs; …

, Chapter: 9 -Problem: 2 >> Assume you are planning to invest $5,000 each year for six years and will earn 10 percent per year. Determine the future value of this annuity due problem if your first $5,000 is invested now. Annuity An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which
Answer Preview: $5,000[(7 716)(1 10)] = $5,000(8 4876) = $42,438, o…

, Chapter: 15 -Problem: 4 >> Describe how the length of the cash conversion cycle is determined. Cash Conversion Cycle Cash conversion cycle measures the total time a business takes to convert its cash on hand to produce, pay its suppliers, sell to its customers and collect cash from its customers. The process starts with purchasing of raw materials from suppliers,...
Answer Preview: It is equal to the oper…

, Chapter: 13 -Problem: 7 >> Assume a corporation earns $75,000 in net income.a. Determine the firm’s income tax liability.b. Calculate the firm’s average income tax rate. Corporation A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the
Answer Preview: a. Corporate taxes to be p…

, Chapter: 15 -Problem: 10 >> What are the sources of cash inflows to a firm over any time frame?
Answer Preview: The main sources …

, Chapter: 15 -Problem: 3 >> The Robinson Company from Problem 2 had net sales of $1,200,000 in 2016 and $1,300,000 in 2017.a. Determine the receivables turnover in each year.b. Calculate the average collection period for each year.c. Based on the receivables turnover for 2016, estimate the investment in receivables if net sales were $1,300,000 in 2017. How much of a change in the 2017 receivables occurred?
Answer Preview: a. AR turnover = Sales/AR = $1,300,000/$350,000 = 3 …

, Chapter: 17 -Problem: 16 >> How is the stand-alone principle applied when evaluating whether to invest in projects?
Answer Preview: Under the stand-alone princi…

, Chapter: 13 -Problem: 6 >> Find the annual depreciation expenses for the following items:a. Original cost is $35,000 for an asset in the three-year class.b. Original cost is $70,000 for an asset in the five-year class.
Answer Preview: a. Year 1 .3333 $35,000 = $11,665 50 Year 2 .4445 $35,000 = 15,557 50 Year 3 .1481 $35,000 = 5,183 …

, Chapter: 6 -Problem: 2 >> What are the four requirements that need to be determined when entering into a forward contract?
Answer Preview: Any forward rate situation will require the answer to …

, Chapter: 17 -Problem: 5 >> Explain the process to estimating a bid price by estimating zero NPV cash flow needs.
Answer Preview: The process involves estimating 1. Initial outlay for the project (typically an inve…

, Chapter: 9 -Problem: 3 >> Explain simple interest.
Answer Preview: Simple interest …

, Chapter: 18 -Problem: 2 >> Explain why determining a firm’s optimum debt/equity mix is important.
Answer Preview: Expected returns and value (or interest …

, Chapter: 9 -Problem: 2 >> Go to the Federal Reserve website, http://www.federalreserve.gov. Go to “Economic Research and Data,” and access “Consumer Credit.” Determine current interest rates charged by finance companies versus commercial banks on new automobile loans. Also compare the cost of new automobile loans between finance companies and commercial banks over the past three years.
Answer Preview: The above links provide access to descriptive materials re…

, Chapter: 18 -Problem: 5 >> How did the Fed’s loose money policies after the 2007–2009 Great Recession affect investors?
Answer Preview: Falling interest rates raised th…

, Chapter: 9 -Problem: 8 >> Describe the process for solving for the interest rate in present and future value problems. Future Value Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...
Answer Preview: If we know the present value, future value…

, Chapter: 14 -Problem: 2 >> The Robinson Company had a cost of goods sold of $1,000,000 in 2016 and $1,200,000 in 2017.a. Calculate the inventory turnover for each year. Comment on your findings.b. What would have been the amount of inventories in 2017 if the 2016 turnover ratio had been maintained?
Answer Preview: a. 2016: $1,000,000/$350,000 = 2 86 2017: $1,200,000/…

, Chapter: 13 -Problem: 2 >> How do the financial markets accommodate the needs of risky firms and safe firms?
Answer Preview: Financial markets adjust the pric…

, Chapter: 17 -Problem: 9 >> What is meant by a project’s net present value? How is it used for choosing among projects? Net Present Value What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
Answer Preview: Net present value is the present value of a p…

, Chapter: 2 -Problem: 8 >> Describe how an individual’s net worth is determined.
Answer Preview: Individual net worth is the su…

, Chapter: 18 -Problem: 18 >> Describe the term “indifference level” in conjunction with EBIT/eps analysis.
Answer Preview: The indifference level is the level of E…

, Chapter: 8 -Problem: 2 >> A one-year U.S. Treasury security has a market interest rate of 2.25 percent. If the expected real rate of interest is 1.5 percent, what is the expected annual inflation rate?
Answer Preview: r = RR + …

, Chapter: 18 -Problem: 7 >> Here are the income statements for Genatron Manufacturing Corporation for 2016 and 2017: Assuming one-half of the general and administrative expenses are fixed costs, estimate Genatron’s DOL, DFL, and DCL in 2016 and 2017. Corporation A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization forme
Answer Preview: 2016: DOL = ($1,300,000 985,000)/$200,000 = 1 575 DFL= $…

, Chapter: 3 -Problem: 1 >> Go to http://www.stlouisfed.org and identify sources and uses of funds for commercial banks.
Answer Preview: Sources of funds would be commercial bank liabilities and owners capital. Uses of funds would be com…

, Chapter: 17 -Problem: 2 >> Why might there be tax implications when an asset is sold at the termination of a capital budgeting project? Capital Budgeting Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...
Answer Preview: If assets are depreciated during the life of a project and are th…

, Chapter: 11 -Problem: 1 >> Briefly describe what is meant by a derivative security.
Answer Preview: A derivative security derives it…

, Chapter: 16 -Problem: 7 >> What is meant by an unsecured loan? Are these loans an important form of bank lending?
Answer Preview: Unsecured loans have n…

, Chapter: 13 -Problem: 25 >> What are the responsibilities of a firm’s controller?
Answer Preview: The controlle…

, Chapter: 14 -Problem: 1 >> The Robinson Company has the following current assets and current liabilities for these two years: a. Compare the current ratios between the two years.b. Compare the acid test ratios between 2016 and 2017. Comment on your findings. Transcribed Image Text: 2016 2017 Cash and marketable securities $50
Answer Preview: a. 2016: $700,000/$350,000 = 2 0 2017: $900,000/$600,000 = 1 …

, Chapter: 4 -Problem: 4 >> A bank has $10 million in vault cash and $110 million in deposits. If total bank reserves were $15 million with $2 million considered to be excess reserves, what required reserves ratio is implied?
Answer Preview: $15 million - $2 m…

, Chapter: 18 -Problem: 11 >> How does the cost of new common stock differ from the cost of retained earnings? Common Stock Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Answer Preview: These two costs dif…

, Chapter: 12 -Problem: 4 >> Business risk has three possible sources. What are they?
Answer Preview: Business risk is caused by chang…

, Chapter: 17 -Problem: 2 >> Hammond’s Fish Market purchased a $30,000 fork lift truck. It has a five-year useful life. The firm’s tax rate is 25 percent.a. If the fork lift is straight-line depreciated, what is the firm’s tax savings from depreciation?b. What will be its book value (BV) at the end of year three?c. Suppose the fork lift can be sold for $10,000 at the end of three years. What is its after-tax salvage value?
Answer Preview: a. Depreciation expense - $30,000/5 = $6,000 Depreciation tax shield = 0 25 x $6…

, Chapter: 12 -Problem: 1 >> Stock market forecasters are predicting the stock market will rise 5 percent next year. Given the beta of each stock below, what is the expected change in each stock’s value?Firm               Beta BCD................1.25 NOP................0.70 WXY................1.10 ZYX.................1.00
Answer Preview: Beta represents the relative volatility of an asset …

, Chapter: 15 -Problem: 14 >> Of its monthly sales, The Kingsman Company historically has had 25 percent cash sales with the remainder paid within one month. Each month’s purchases are equal to 75 percent of the next month’s sales forecast; suppliers are paid one month after the purchase. Salary expenses are $50,000 a month, except in January, when bonuses equal to 1 percent of the previous year’s sales are paid out. Interest
Answer Preview: a. Dec. Jan. Feb. Mar. Apr. Sales $200,000 $100,000 $200,000 $250,000 $300,000 Cash Sales (25%) 25,0…

, Chapter: 5 -Problem: 1 >> Go to the St. Louis Federal Reserve Bank’s website at http://www.stlouisfed.org, and access current economic data.a. Find M1 and the monetary base, and then estimate the money multiplier.b. Determine the nominal gross national product (GNP in current dollars). Estimate the velocity of money using M1 from (a) and nominal GNP.c. Indicate how the money multiplier and the velocity of money have change
Answer Preview: a. The instructor will need to periodically update the money supply (M1) and monetary base (MB) a…

, Chapter: 14 -Problem: 10 >> Genatron wants to estimate what will happen to its income before interest and taxes if its net sales change from the 2017 level of $1,500,000. Refer to Genatron’s 2017 income statement, shown in Problem 6, where the income before interest and taxes is $247,000 (EBT of $190,000 plus interest of $57,000). Assume that the cost of goods sold are variable expenses and that the other operating expenses
Answer Preview: a. Percent Change Current 10% + 10% Net sales $1,500,000 $1,350,000 $1,650,…

, Chapter: 13 -Problem: 3 >> Use your knowledge of balance sheets to fill in the missing amounts: Assets Cash.......................................................................$50,000 Accounts receivable..............................................80,000 Inventory..............................................................100,000 Total current assets............................................––––––– Gross plant and eq
Answer Preview: Cash $ 50,000 Accounts payable $ 12,000 Accounts receivable 80,000 Notes payable …

, Chapter: 17 -Problem: 25 >> Why is depreciation considered a tax shield?
Answer Preview: Its effect is to reduce taxable incom…

, Chapter: 18 -Problem: 17 >> What is EBIT/eps analysis? What information does it provide managers?
Answer Preview: EBIT/eps analysis allows man…

, Chapter: 17 -Problem: 1 >> Suppose the Quick Towing Company purchases a new tow truck. The old truck had a book value of $1,000 and was sold for $1,420. If Quick Towing is in the 34 percent marginal tax bracket, what is the tax liability on the sale of the truck? What is the after-tax cash fl ow on the sale?
Answer Preview: The selling price exceeds book value s…

, Chapter: 16 -Problem: 22 >> When a business firm uses its inventory as collateral for a bank loan, how is the problem of storing and guarding the inventory handled for the bank?
Answer Preview: The inventory can be moved in…

, Chapter: 13 -Problem: 4 >> Determine the marginal and average tax rates under the tax law for corporations with the following amounts of taxable income:a. $60,000b. $150,000c. $500,000.
Answer Preview: a. $60,000 Income = $60,000 Marginal tax rate = 25% Total …

, Chapter: 17 -Problem: 4 >> Explain the process to estimating cash flows for a cost-saving project.
Answer Preview: The process involves estimating 1. Initial outlay for th…

, Chapter: 18 -Problem: 7 >> What is the relationship between a firm’s cost of capital and investor required rates of return? Cost Of Capital Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
Answer Preview: They are identical. The cost of capital …

, Chapter: 17 -Problem: 17 >> What are the three types of relevant cash flows to be considered in analyzing a project?
Answer Preview: Incremental after-tax cash flow…

, Chapter: 17 -Problem: 2 >> Why is proper management of fixed assets crucial to the success of a firm?
Answer Preview: The profitability of a firm is affe…

, Chapter: 15 -Problem: 15 >> What characteristics should an investment have to qualify as an acceptable marketable security?
Answer Preview: Marketable securities must be hi…

, Chapter: 15 -Problem: 4 >> Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 2016 and $1,200,000 in 2017.a. Calculate the inventory turnover for each year. Comment on your findings.b. What would have been the amount of inventories in 2017 if the 2016 turnover ratio had been maintained?
Answer Preview: a. Inventory turnover= COGS/Inventory = $1,200,000/$500,000 = 2 40 (2017…

, Chapter: 18 -Problem: 15 >> Below are items from recent financial statements from Moss and Mole Manufacturing:Current Balance Sheet (all numbers are in thousands) Total assets.........................................................$192,000 Stockholder’s equity.............................................$44,000 Total liabilities.....................................................$148,000 Current Income Statement Sales...
Answer Preview: a. The return on assets is $37,500/$192,000 = 0 1953 The addition to re…

, Chapter: 15 -Problem: 5 >> Explain how the length of the operating cycle affects the amount of funds invested in accounts receivable and inventories. Accounts Receivable Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business
Answer Preview: All else being equal, a longer (sh…

, Chapter: 17 -Problem: 8 >> What kinds of nonfinancial information are needed to conduct project analysis?
Answer Preview: Nonfinancial information …

, Chapter: 17 -Problem: 6 >> Identify some capital budgeting considerations unique to multinational corporations. Capital Budgeting Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...
Answer Preview: Multinational firms …

, Chapter: 15 -Problem: 9 >> Why might firms want to maintain minimum cash balances?
Answer Preview: Firms want to maintain minimum desired c…

, Chapter: 14 -Problem: 3 >> Identify the types of ratios that are used to analyze a firm’s financial performance based on its income statements and balance sheets.
Answer Preview: We examined the following …

, Chapter: 18 -Problem: 9 >> The following are balance sheets for the Genatron Manufacturing Corporation for the years 2016 and 2017: a. Calculate the WACC based on book value weights. Assume an after-tax cost of new debt of 8.63 percent and a cost of common equity of 16.5 percent.b. The current market value of Genatron’s long-term debt is $350,000. The common stock price is $20 per share and 30,000 shares are outstanding. Ca
Answer Preview: a. Using the most recent data (2017), we have: w d = …

, Chapter: 13 -Problem: 8 >> Assume that a corporation purchases a new piece of equipment for $90,000. The equipment qualifies for a three-year class life for depreciation purposes.a. What is the dollar amount of depreciation that can be taken in the first year?b. Determine the depreciation for the remaining years. Corporation A Corporation is a legal form of business that is separate from its owner.
Answer Preview: a. $90,000 x .3333 = $29,997 b. …

, Chapter: 15 -Problem: 12 >> Suppose Eastnorth Manufacturing is planning to change its credit policies next year. It anticipates that 10 percent of each month’s sales will be for cash, two-thirds of each month’s receivables will be collected in the following month, and one-third will be collected two months following their sale. Assuming that Eastnorth’s sales forecast in Table 15.4 remains the same and the expected cash outf
Answer Preview: Nov. Dec. Jan. Feb. Mar. Apr. Sales $80,000 $100,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 Cash (10%) …

, Chapter: 17 -Problem: 10 >> Identify the internal rate of return method and describe how it is used in making capital budgeting decisions. Internal Rate of Return Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about th
Answer Preview: The internal rate of return is the discount r…

, Chapter: 17 -Problem: 1 >> What information sources are used to develop estimates for these project components:a. initial outlays?b. operating life?c. salvage value? Salvage Value Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvag
Answer Preview: a. Information sources include engineering estimates for the design or modifica…

, Chapter: 14 -Problem: 4 >> Which type or category of ratios relates stock market information to financial statement items?
Answer Preview: The market value …

, Chapter: 15 -Problem: 6 >> What affects the amount of financing provided by accounts payable as viewed in terms of the cash conversion cycle? Cash Conversion Cycle Cash conversion cycle measures the total time a business takes to convert its cash on hand to produce, pay its suppliers, sell to its customers and collect cash from its customers. The process starts with purchasing of raw materials from
Answer Preview: The level of the firms cos…

, Chapter: 18 -Problem: 4 >> Faulkner’s Fine Fries Inc. (FFF) is thinking about reducing its debt burden. Given the following capital structure information and an expected EBIT of $50 million (plus or minus 10 percent) next year, should FFF change their capital structure? Capital Structure Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular com
Answer Preview: Current 10% Expected +10% EBIT $45 $50 $55 I 54 54 54 NI $9 …

, Chapter: 14 -Problem: 11 >> How is the DuPont system related to both the balance sheet and the income statement? Balance Sheet Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Answer Preview: Du Pont analysis relates …

, Chapter: 17 -Problem: 3 >> Explain the process to estimating cash flows for a revenue enhancing project.
Answer Preview: The process involves estimating 1. Initial outlay f…

, Chapter: 14 -Problem: 13 >> Following are the consolidated financial statements for Eastnorth Manufacturing’s industry. Use DuPont analysis on the industry financial statements to determine why industry return on equity (ROE) changed from year to year. Financial Statements Financial statements are the standardized formats to present the financial information related to a business or an organizatio
Answer Preview: 2016s rise in ROE was due mainly to higher profitab…

, Chapter: 1 -Problem: 8 >> Go to the U.S. Small Business Administration (SBA) website, http://www.sba.gov, and search for sources of information on starting a new business. Identify and prepare a written summary of the start-up basics described on the SBA site.
Answer Preview: First go to the SBA Web site. Then, cli…

, Chapter: 18 -Problem: 18 >> Using the income statements from the Mount Lewis Copy Centers for 2016 and 2017 in Problem 17, find the percentage change in sales, EBIT, and net income. Use them to compute the DOL, DFL, and degree of combined leverage (DCL).
Answer Preview: The percentage change in sales: ($21,000-20,000)/$20,000 = 5 percent The percentage change in EBIT: …

, Chapter: 14 -Problem: 18 >> What does a firm’s degree of operating leverage (DOL) indicate?
Answer Preview: DOL measures the …

, Chapter: 7 -Problem: 19 >> What are the two types of financial market securities?
Answer Preview: The two types of maturity-related financial markets are money …

, Chapter: 14 -Problem: 5 >> What do liquidity ratios indicate? Identify some basic liquidity ratios.
Answer Preview: Liquidity ratios indicate the abili…

, Chapter: 18 -Problem: 16 >> The following information is from the fi nancial statements of Bagle’s Biscuits:Current Balance Sheet (all numbers are in millions) Total assets.............................................$134.9 Stockholder’s equity................................$51.7 Total liabilities..........................................$83.2Current Income Statement Sales...................................................
Answer Preview: a. The return on assets is $8 0/$134 9 = 0 0593 The addition to ret…

, Chapter: 7 -Problem: 9 >> Define personal saving.
Answer Preview: Personal saving is the s…

, Chapter: 16 -Problem: 18 >> When might a business seek accounts receivable financing? Accounts Receivable Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Answer Preview: Accounts receivable may be pledged as colla…

, Chapter: 15 -Problem: 8 >> Three sets of information are needed to construct a cash budget. Explain what they are.
Answer Preview: The firms minimum desired …

, Chapter: 17 -Problem: 3 >> How do mutually exclusive projects and independent projects differ?
Answer Preview: With mutually-exclusive projects, competing projects all have the …

, Chapter: 1 -Problem: 2 >> The U.S. financial system is composed of (1) policy makers, (2) a monetary system, (3) financial institutions, and (4) financial markets. Indicate which of these components is associated with each of the following roles.a. Accumulate and lend or invest savingsb. Create and transfer moneyc. Pass laws and set fiscal and monetary policiesd. Market and facilitate transfer of financial assets
Answer Preview: The U S. financial system is comprised of: (1) polic…

, Chapter: 16 -Problem: 1 >> What is net working capital? Briefly describe the financing implications when net working capital is positive.
Answer Preview: Net working capital is defined as cur…

, Chapter: 17 -Problem: 6 >> Casey’s Baseball Bats is planning to export their product to the Asian market. They estimate up-front expenses of $1 million this year (year 0) and $3 million next year (year 1). Operating cash flows in years two, three, and four will be (in dollars) $100,000, $200,000, and $400,000, respectively. After year four, they expect operating cash flows to grow at 10 percent a year indefinitely. If 15 pe
Answer Preview: Required rate of return: 15% Given cash flow data: Cash flow Term…

, Chapter: 14 -Problem: 8 >> What do profitability ratios indicate? Identify some measures of profitability.
Answer Preview: Profitability ratios indicate the ability of th…

, Chapter: 14 -Problem: 6 >> Following are financial statements for the Genatron Manufacturing Corporation for 2017 and 2016. a. Apply DuPont analysis to the 2017 and 2016 financial statements data.b. Explain how financial performance differed between 2017 and 2016. Financial Statements Financial statements are the standardized formats to present the financial information related to a business or a
Answer Preview: a. b. 2017s ROE rose because of a rising profit margin and a greater …

, Chapter: 6 -Problem: 3 >> Why is hedging similar to buying insurance?
Answer Preview: Hedging allows us to lock in a price or invest…

, Chapter: 15 -Problem: 11 >> What are the sources of cash outflows from a firm over any time frame?
Answer Preview: The main sources of cash outflows are pay…

, Chapter: 15 -Problem: 34 >> What are the benefits to a firm of reducing its working capital?
Answer Preview: Benefits include less …

, Chapter: 14 -Problem: 16 >> What is the purpose of knowing the break-even point?
Answer Preview: It tells managem…

, Chapter: 1 -Problem: 3 >> Financial markets may be categorized as (1) debt securities markets, (2) equity securities markets, (3) derivative securities markets, and (4) foreign exchange markets. Indicate in which of these markets the following securities trade.a. Mortgagesb. Bondsc. Common stocksd. Currencies
Answer Preview: a. Mortgages [# 1 debt securities markets] …

, Chapter: 17 -Problem: 21 >> “Our bank will finance the product expansion project with at a loan interest rate of 10 percent. Make sure the project’s cash flow estimates include this interest expense.” Do you agree or disagree? Explain.
Answer Preview: Disagree. Financing costs are not con…

, Chapter: 17 -Problem: 5 >> Bart and Morticia, owners of the prestigious Gomez-Addams Office Towers, are concerned about high heating and cooling costs and client co

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