Week 4 Assignment-Fair Value DUE DATE Sunday midnight of.docx
- 1. Week 4 Assignment-Fair Value DUE DATE: Sunday midnight of Week 4, submitted in a MS Word (or Excel if computations required) document with filename format: Last First_Week X hwk.doc or .xls Make sure your name appears on each page of the homework using the header function. Homework questions: 1. The Fair Value requirement has been blamed by some for the credit market crunch that started in 2007, worsened in 2008 and continues into 2009. Discuss what effect you think Fair Value had on financial institutions and why some believe that it precipitated the current economic recession. Do you agree or disagree that Fair Value caused the collapse of the mortgage and lending markets? There are a number of good articles and links to help you with this such as the article in the Web Links page from the January 20,
- 2. 2009 Boston Globe about the impact on State Street Corporation’s capital from potentially having to permanently write down the value of assets (it will help you understand how marking down the value of assets impacts the banks’ capital, and how in turn, this impacts their ability to lend). Also, the JOA May 2008 3 Articles with view pro and con about Fair Value vs. Historic Cost. There are a number of other readings to help with this topic or you may gather your own-please share them if you would on the student section of the Web Links page. 2. You are the CFO of a publicly traded company and are getting ready to prepare you year- end financial statements. In your investment portfolio you have: a. Long-term bank CD’s b. Stock holdings in 5 publicly traded companies c. Stock holdings in 2 privately held companies d. Investment in a real estate trust (REIT) which owns strip malls and other commercial buildings for retail establishments. This trust trades
- 3. on a market with other similar trusts, although the trades are infrequent. Take into account the current real estate market when evaluating this investment. e. Private equity investment in a joint venture for the development of a new green energy method to produce electricity. f. Complex foreign currency hedges that were custom-designed by an investment bank for the company, to hedge their exchange rate exposure on overseas transactions. What level for evaluation would each fall into and what method(s) would you use to determine the fair value of each? How easy or difficult would each be and why? The Nov 16, 2008 Financial Week Article on the Web Links page about Illiquid Bank Assets may help with this question. 3. Find the financial statements of a publicly traded company that has measured assets
- 4. and/or liabilities at fair value. You will find this information in the footnotes (just open up the document and search the page with either Fair Value or FAS 157 as a key word). What financial ratios (name at least 2) could be affected by the difference between measuring these assets at historic cost vs. fair value? How would this company’s ratios differ from the current presentation under fair value than under historic cost? Do the footnotes tell you if there was an active market for valuing the assets-if so, what was the basis for the valuation? If there was no active market, what did they base the valuation on? Does this sound like an appropriate measure of the asset(s) value? What problems could there be with the measure(s) that was used? If you were a banker preparing to loan money to the company, how much difference would this make in your decision? Take risk into account in this decision and not just the difference in value caused by the methods. Include the annual report with your answer and reference the pages in the report
- 5. where you obtained your information. Prepare any computations on Excel and submit as a separate document (make sure to use the above naming convention for all files). 4. A company’s management and its auditors have the same goal in mind-to prepare financial statements that fairly present the financial position of the company under US GAAP (well, at least until we convert to IFRS!) The auditors “opine” on the fair presentation. For example, here is a statement from the independent auditor’s report of Mozilla Foundation: In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mozilla Foundation and Subsidiary as of December 31, 2007 and 2006, and the changes in their net assets and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
- 6. When Fair Value cannot be determined by an actively traded market and management judgment must be applied, such as with Level 3 assets, discuss where disagreements might occur between management and the auditors, and why. In other words, what valuation might management may have computed and the impact it would have on the reporting year, vs. the role that the audit firm plays and the liability they assume in providing an unqualified or “clean” opinion-why might they disagree on the inputs and judgment used by management? 5. So now that you have had 2 full weeks to think about Fair Value, where do you stand on the topic? Don’t be wishy-washy! Form an opinion and support it with evidence from the work we have done. 9Discussion-Diversity in Hiring View the "Manager's Hot Seat: Diversity in Hiring - Candidate Conundrum" video case and then post a new thread to this discussion board that addresses the following: · Read the Practical Action box feature "The Right Way to Conduct an Interview." Which of the suggestions did you see implemented at Beck n' Call? Explain. ·
- 7. · If you were the Human Resources manager at Beck n' Call, would you recommend the use of any pre-employment tests to clarify the decision that Robert and Paul must make between the two candidates? What tests would you use, and why? · Would you recommend another approach to the selection process that may have worked better? Explain. · Pass or fail? Grade Robert on his management skills, techniques, and overall performance. Explain what he should have done differently or better. This posting, consisting of a minimum of 4 full paragraphs(At least 500 words), must include chapter ideas and concepts to support your answers. Please make certain to cite any outside sources used. Change Resistance assignment Look at the list "Ten Reasons Employees Resist Change" on p. 350-351. Then write an essay addressing three or more of the reasons in the list. Give examples of times when you have seen these reasons in action, and tell about the resulting outcome. Is there a suggestion you might have to make things work out for the better? For example, maybe a relative had a hard time switching to a new computer software program and lost his job. Your assignment should be 2-3 pages long (excluding cover page, attachments, etc.) (At least 600 words), double-spaced, using 12-point font and 1-inch margins. Keep this in mind: You will need to write almost a page on each one if you choose to write only on three reasons. If you write on all of them you can write less on each one. Keep the expected length in mind. Keep in mind that, while there are no "absolutely correct" answers for these questions, this is not an opportunity for opinion alone. Grading will reflect your reasoning and critical thinking skills, your ability to integrate what you have assimilated from material presented in the textbook and other learning materials, the clarity of your response and its
- 8. appearance. Please remember that, if your paper integrates information from published sources and/or you build on the work of others, you must be careful not to plagiarize. You can find information about plagiarism at the Plagiarism.org website; a link to this website has been provided under the "Resources" tab in the main menu of the course. Please also see the rubric posted under the "Resources" tab in the main menu of the course for additional guidelines on grading. Discussion - Legal/Ethical Challenge Read the Chapter 11 Legal/Ethical Challenge ("Should Airlines Accomodate Overweight People?") on. p.372-373 and then post a new thread to this discussion board that addresses the options posed at the end of the exercise. This posting, consisting of a minimum of 4 full paragraphs(At least 500 words), must include chapter ideas and concepts to support your answers. Please make certain to cite any outside sources used. paper The topic for your Final Project can be anything covered in this course. Choose something that really interested you, something you would like to explore more fully, or something you might like to debate in class You can choose any one from the key points in the below screen shot, BUT THIS PAPER HAVE TO REALTIVE THAT CONCEPT IN BOOK. Part1: (introduction and the beginning of the paper) Part 1 will show your instructor that you have started your project, and it will have the motivating effect of getting you started. Note: This is more than a statement saying what you plan to do; this is the beginning of your work. You'll need to decide what your topic will be, and what option you'll choose for presenting it. Then submit the beginning part of your project. A paper might require a rough draft (an unedited
- 9. version, or the first few paragraphs), (ONE PAPE) Part2:( finished paper) Your assignment should be 4-5 pages long (excluding cover page, attachments, etc.), double-spaced, using 12-point font and 1-inch margins. (at least 1200 words) The parts are need separate two file. If your paper integrates information from published sources and/or you build on the work of others, you must be careful not to plagiarize. You can find information about plagiarism at the Plagiarism.org website; a link to this website has been provided under the "Resources" tab in the main menu of the course. Please also see the rubric posted under the "Resources" tab in the main menu of the course for additional guidelines on grading.