Sutton Inc.’s underlying economic reality is a perfectly stable business that began in Year 0 (see excel Drill 5 Accruals. xlsx). Every year, they generate $500,000 in sales, half of which are in cash, the other half are credit sales that are collected the following year. All other items of revenue and expense (including tax expense) are identical each year (see Years 1 and 2 in excel). However, you noticed that they accelerated some revenue into Year 3 (remember: they can't accelerate cash collection). Forecast Year 4’s: Earnings per share (rounded to the nearest penny) Return on assets (rounded to 2 decimal places. For example, enter .28176 as 28.18). (Guidance: it might be helpful to prepare the statement of cash flows and remember to adjust assets as necessary)

You are chairman of the board of a successful technology firm. there is a nominal federal corporate tax rate of 35 percent, yet the effective tax rate of the typical corporation is about 12.6%. your firm has been clever with use of transfer pricing and keeping money abroad and has barely paid any taxes over the last 5 years; during this same time period, profits were $28 billion. one member of the board feels that it is un-american to use various accounting strategies in order to avoid paying taxes. others feel that these are legal loopholes and corporations have a fiduciary responsibility to minimize taxes. one board member quoted what the ceo of exxon once said: “i’m not a u. s. company and i don’t make decisions based on what’s good for the u. s.” what are the alternatives? what are your recommendations? why do you recommend this course of action?