1. Physician assistants have long argued that they have the ability to provide as much as 70 percent of the medical services provided by primary care physicians at a much lower cost, yet government regulations limit their ability to work independently of physicians. Explain what would happen to the level of competition in the physician services market if all the statutes limiting the activities of physician assistants were eliminated. 

2. Discuss how enhanced competition in the physician services market may have affected the ability of physicians to induce the demand for medical services. 

3. Analyze the alternative compensation schemes discussed in this chapter that private insurers use to pay physicians. Think in terms of how these different compensation schemes may affect the incentive of physicians to provide an excessive amount of medical services. 

4. As you know, various medical groups are in the process of developing medical guidelines. Assuming guidelines are developed and widely adopted by physicians, how will this affect the physician services market?

5. Some argue that practice variations exist because information on practice style is disseminated slowly. Phelps (1992) argues that physicians should be allowed to patent and sell their practice strategies. Explain how this policy might affect practice variations. 

6. Discuss the theoretical and empirical issues surrounding the supplier-induced demand theory. 

7. Discuss the factors that have contributed to the increase in expenditures on physician services over the past decade. 

8. Explain the many institutional and structural changes that might make physician licensing obsolete. 

9. Use each of McGuire’s quantity setting models to explain how a physician is likely to react to price controls. In particular, explain how the physician continues to earn economic profits despite the implementation of price controls. 

10. As we learned, MRI and CT scanning facilities have been growing at a fast pace over the last decade. Consider the case in which physicians make referrals to facilities in which they have an ownership stake. Identify and describe some of the incentives such arrangements provide to physicians. Are there countervailing forces that may act as controls on those incentives?

Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.

 

Exercises

 

 

E11-7. Quay Co. had the following transactions during the current period.

 

Mar. 2               Issued 5,000 shares of $5 par value common stock to attorneys in payment of a bill for $30,000 for services performed in helping the company to incorporate.

 

June 12             Issued 60,000 shares of $5 par value common stock for cash of $375,000.

 

July 11              Issued 1,000 shares of $100 par value preferred stock for cash at $110 per share.

 

Nov. 28             Purchased 2,000 shares of treasury stock for $80,000.

 

 

Instructions

 

Journalize the transactions.

 

 

E11-13. On January 1, Guillen Corporation had 95,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $5 per share. During the year, the following occurred.

 

 

Apr. 1               Issued 25,000 additional shares of common stock for $17 per share.

 

June 15             Declared a cash dividend of $1 per share to stockholders of record on June 30.

 

July 10              Paid the $1 cash dividend.

 

Dec. 1              Issued 2,000 additional shares of common stock for $19 per share.

 

        15             Declared a cash dividend on outstanding shares of $1.20 per share to stockholders of record on December 31.

 

Instructions

 

a)     Prepare the entries, if any, on each of the three dividend dates.

 

b)    How are dividends and dividends payable reported in the financial statements prepared at December 31?

 

 E12-8. Presented below are two independent situations.

 

1.     Gambino Cosmetics acquired 10% of the 200,000 shares of common stock of Nevins Fashion at a total cost of $13 per share on March 18, 2015. On June 30, Nevins declared and paid a $60,000 dividend. On December 31, Nevins reported net income of $122,000 for the year. At December 31, the market price of Nevins Fashion was $15 per share. The stock is classified as available-for-sale.

 

2.     Kanza, Inc., obtained significant influence over Rogan Corporation by buying 40% of Rogan’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2015. On June 15, Rogan declared and paid a cash dividend of $30,000. On December 31, Rogan reported a net income of $80,000 for the year.

 

Instructions

 

Prepare all the necessary journal entries for 2015 for (a) Gambino Cosmetics and (b) Kanza, Inc.

 

 

 

E12-12.Uttinger Company has the following data at December 31, 2015.

The available-for-sale securities are held as a long-term investment.

 

Instructions

 

a)     Prepare the adjusting entries to report each class of securities at fair value.

 

b)    Indicate the statement presentation of each class of securities and the related unrealized gain (loss) accounts.

 

Problems

 

 

 

P11-3A.The stockholders’ equity accounts of Castle Corporation on January 1, 2015, were as follows.

 

Preferred Stock (8%, $50 par, cumulative, 10,000 shares authorized)             $  400,000

 

Common Stock ($1 stated value, 2,000,000 shares authorized)                        1,000,000

 

Paid-in Capital in Excess of Par—Preferred Stock                                             100,000

 

Paid-in Capital in Excess of Stated Value—Common Stock                            1,450,000

 

Retained Earnings                                                                                         1,816,000

 

Treasury Stock (10,000 common shares)                                                             50,000

 

During 2015, the corporation had the following transactions and events pertaining to its stockholders’ equity. 

 

Feb. 1               Issued 25,000 shares of common stock for $120,000.

 

Apr. 14                         Sold 6,000 shares of treasury stock—common for $33,000.

 

Sept. 3                         Issued 5,000 shares of common stock for a patent valued at $35,000.

 

Nov. 10             Purchased 1,000 shares of common stock for the treasury at a cost of $6,000.

 

Dec. 31             Determined that net income for the year was $452,000.

 

No dividends were declared during the year.

 

Instructions

 

a)     Journalize the transactions and the closing entry for net income.

 

b)    Enter the beginning balances in the accounts, and post the journal entries to the stockholders’ equity accounts. (Use J5 for the posting reference.)

 

c)     Prepare a stockholders’ equity section at December 31, 2015, including the disclosure of the preferred dividends in arrears.

 

 

P12-6A.The following data, presented in alphabetical order, are taken from the records of Nieto Corporation.

 

The investment in Sasse common stock is considered to be a long-term available-for-sale security.

 

Instructions

 

Prepare a classified balance sheet at December 31, 2015.

Which of the following business forms is the easiest to raise capital?

a. sole proprietorship.
b. partnership.
c. corporation
d. limited liability partnership

Which of the following factors or activities can be controlled by management of the firm?

a. capital budgeting
b. the level of interest rates
c. stock market conditions
d. the level of economic activity

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is
a. None of these
b. $63,510
c. $69,655
d. $68,931

Which of the following best represents cash flows to investors?
a. Cash flow from operating activity, minus cash flow invested in net working capital, minus cash flow invested in long-term assets.
b. Cash flow from operating activity, plus cash flow generated from net working capital. 
c. Earnings before interest and taxes time 1 minus the firm’s tax rate. 
d. net income minus dividends paid to preferred stockholders.

Coverage ratios: Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio?
a. None of these
b. 15.42 times
c. 18.34 times
d. 14.15 times

Multiples analysis: Turner Corp. has debt of $230 million and generated a net income of $121 million in the last fiscal year. In attempting to determine the total value of the firm, an investor identified a similar firm in Jacobs, Inc., an all-equity firm. This firm had 150 million shares outstanding, a share price of $14.25, and net income of $182 million. What is the total value of Turner Corp.? Round to the nearest million dollars.
a. $1,651 million
b. $1,191 million
c. $1,421 million
d. $1,715 million

Efficiency ratio: If Viera, Inc., has an accounts receivable turnover of 3.9 times and net sales of $3,436,812, what is its level of receivables?

a. $881,234
b. $13,403,567
c. $1,340,357
d. $81,234

The operating cycle
a. To measure operating cycle we need another measure called the days’ payables outstanding.
b. begins when the firm receives the raw materials it purchased that would be used to produce the goods that the firm manufactures.
c. begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on credit sales.
d. ends not with the finished goods being sold to customers and the cash collected on the sale; but when you take into account the time taken by the firm to pay for its purchases.

The asset substitution problem occurs when
a. managers substitute less risky assets for riskier ones to the detriment of bondholders.
b. managers substitute risker assets for less risker ones to the detriment of equity holders.
c. managers substitute riskier assets for less risky ones to the detriment of bondholders.
d. managers substitute less risky assets for riskier ones to the detriment of equity holders.

The financing plan of a firm will indicate
a. the firm’s dividend policy, the desired capital structure for the firm, and the firm’s working capital policy.
b. the dollar amount of funds that has been raised externally and the sources of funds available to the firm, the firm’s dividend policy, and the firm’s working capital policy.
c. the dollar amount of funds that has been raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s dividend policy.
d. the dollar amount of funds that has been raised externally, and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s working capital policy.

Present value: Tommie Harris is considering an investment that pays 6.5 percent annually. How much must he invest today such that he will have $25,000 in seven years? (Round to the nearest dollar.)
a. $16,088
b. $38,850
c. $23,474
d. $26,625

PV of multiple cash flows: Hassan Ali has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.)
a. $36,022
b. $39,208
c. $33,124
d. $41,675

Present value of an annuity: Transit Insurance Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)
a. $251,154
b. $186,250
c. $101,766
d. $124,868

PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?
a. $11.50.
b. $10.76
c. $9.80
d. $11.88.

The process of identifying the bundle of projects that creates the greatest total value and allocating the available capital to the projects is known as
a. budgeting
b. risk analysis
c. rationing
d. capital rationing

What might cause a firm to face capital rationing?
a. if a firm rejects some capital investments that are expected to generate positive NPVs.
b. if investors require returns for their capital that are too high
c. if a firm has several projects that are expected to generate negative IRRs.
d. If a firm has more than one project with a positive NPV.

The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm’s beta if the firm’s marginal tax rate is 35 percent?
a. 1.28.
b. 4.10.
c. 1.60.
d. 1.0.

Which type of project do financial managers typically use the highest cost of capital when evaluating?

a. Efficiency projects
b. Extension projects
c. New product projects
d. Market expansion projects

Planning models that are more sophisticated than the percent of sales method have:

a. all variable costs change directly with sales
b. working capital accounts like inventory, accounts receivable, and accounts payables vary directly with sales.
c. fixed assets that do not always vary with sales.
d. all of these are true.

External financing needed: Triumph Company has total assets worth $6,413,228. Next year it expects a net income of $3,145,778 and will pay out 70 percent as dividends. If the firm wants to limit its external financing to $1 million, what is the growth rate it can support?
a. 6.4%
b. 32.9%
c. 30.3%
d. 26.5%

 

Forms of business organizations

Sole proprietorships

• Form of organization wherein one person owns and runs the business
• Benefits: Easy to set up, easy to manage, tax advantages, distribution of income is simple
• Challenges: Unlimited liability, limited capital, lack of synergy Partnerships

• Form of organization wherein two or more people own a company and agree to work as partners to finance and run the business
• Benefits: Leadership synergy, simple to set up and dissolve, more access to capital

1. (15 pts.)
Suppose the Fed wants to raise the nominal interest rate. Explain the three available mechanisms the Fed can use to achieve this goal. In your answer, use a graph of the money market to show how the Fed’s action translates into a higher nominal interest rate.
2. (10 pts.)
a. (6 pts.)
Explain the difference between the three Fed discount window programs.
b. (4 pts.)
Why does the Fed set the discount rate above the Fed Funds rate?
3. (25 pts.)
Suppose the Fed decides to sell $14 billion in Treasury bonds. Assume that the reserve requirement is 8%, banks hold 4% in excess reserves, but the public holds no cash.
What is the total increase or decrease in the money supply which would result from the Fed’s action? Explain your answer, and show your calculations.
4. (50 pts.)
Assume the public in the small country of Harvardia does not hold any cash. Commercial banks, however, hold 5% of their checking deposits as excess reserves, regardless of the interest rate.
a. (5 pts.)
Consider the balance sheet of one of several identical banks:
ASSETS LIABILITIES & NET WORTH
Reserves $ 400 Checking Deposits $2,000
Loans $1,600 Net Worth $ 0
What is the required reserve ratio?
b. (10 pts.) 
If the total money stock (supply) is $100,000, find the total amount of reserves held in the banking system. Show your work. Use a diagram to show what the money supply curve looks like for this economy, fully labeled.
c. (10 pts.)
The Harvardia Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation. How many dollars worth of bonds should the Central Bank buy or sell? Assume that excess reserves are 5% and the required reserve ratio is what you found in part a. Show your work.
d. (25 pts.)
Beginning from the money market equilibrium that prevailed before the open market operation, explain the effect of the Central Bank’s policy on the equilibrium interest rate. Will the interest rate change more if the money demand curve is steeper or flatter? Explain with reference to one well-labeled diagram.
(Hint: On one diagram, show both a steep and a flat money demand curve, along with one money supply curve. Then show what happens along the two curves as the money supply changes. To explain your result, think about what a steeper or flatter money demand curve implies about money demand.) 

 

 

Home Depot Renovates ltself with New Systems and Ways of Working

 

plese answer the following qustion from the attached