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11. Trading Marketable Securities: A. are consid...

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11. Trading Marketable Securities: A. are considered non-current assets. B. are recorded at amortized cost. C. are marked to the lower of cost or market each accounting period. D. are marked to market each accounting period. 12. The classification of marketable equity securities as trading or available-for-sale is determined by: A. management's intent regarding the disposition of the securities. B. when the securities mature. C. whether the current assets are greater or less than the current liabilities. D. whether management wants to mark them to market or not. 13. The reclassification of trading securities as available-for-sale would produce the following effect: A. The balance sheet would need to be adjusted to report the securities at fair market value and there would be no effect on the income statement. B. There would be no effect on either the balance sheet or the income statement. C. The balance sheet would need to be adjusted to report the securities at fair market value and unrealized gains or losses on the date of the transfer would be included in net income. D. There would be no effect on the balance sheet and unrealized gains or losses on the date of the transfer would be included in net income. 14. The equity method of accounting for investments requires: A. Investment should be marked to market each accounting period. B. Pro-rata share of investee's earnings should be recorded as investment income. C. Company should not have significant influence over investee. D. Goodwill related to purchase of investee stock to be recorded separately on balance sheet. 3. (20 points) What is the equation to calculate terminal value? If excel calculates that the npv or present value of a set of forecasted free cash flows is $ 4,400, there are $400 in marketable securities on the balance sheet, and $1,000 in debt calculate the total value of the equity. Given the value of equity you calculated above calculate the intrinsic price per Share if there are 500 shares outstanding? After you complete the valuation you call down to the trading floor and ask for the current price. You are told the shares are trading at $8.35. Are the shares undervalued or overvalued?

 

Paper#6034 | Written in 18-Jul-2015

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