Information is provided below from the financial statements of two companies for 2004.

Jekle’s operating expenses include fixed costs of 5,000. Hyde’s operating expenses include fixed costs of 50,000. All other operating expenses vary in proportion to sales for both companies. Assume that during 2005 sales for both companies increased by 20% from the amount reported, to 33,600 for Jekle and to 90,000 for Hyde.

Required

A. Compute the net income Jekle and Hyde would report for 2005 if sales increased by 20%.

B. Compute return on assets for Jekle and Hyde in 2004 and 2005, assuming the increase in sales and no change in total assets.

C. Explain why the increase in sales would affect Jekle and Hyde differently and explain which company is riskier.

Sanders agreed in writing to write, direct, and produce a motion picture on the subject of lithography (a method for printing using stone or metal) for the Tamarind Lithography Workshop. After the completion of this film, Four Stones for Kanemitsu, litigation arose concerning the parties’ rights and obligations under their agreement. Tamarind and Sanders resolved this dispute by a written settlement agreement that provided for Tamarind to give Sanders a screen credit stating: “A Film by Terry Sanders.” Tamarind did not comply with this agreement and failed to include the agreed-upon screen credit for Sanders. Sanders sued Tamarind seeking damages for breach of the settlement agreement and specific performance to compel Tamarind’s compliance with its obligation to provide the screen credit.

a. What arguments would support Sanders’s claim for specific performance in addition to damages?

b. What arguments would support Tamarind’s claim that Sanders was not entitled to specific performance in addition to damages?

c. Which side’s arguments are most convincing? Explain.