Expert Answers

1. For several years, a number of Food Lion, Inc., grocery stores were unprofitable. The company closed, and continues to close, some of these locations. It is apparent that the company will not be able to recover the cost of the assets associated with the closed stores. Thus, the current value of these impaired assets must be written down (see the Case in Point on page 381).

A recent Food Lion income statement reports a $9.5 million charge against income pertaining to the write-down of impaired assets.

a. Explain why Food Lion must write down the current carrying value of its unprofitable stores.

b. Explain why the recent $9.5 million charge to write down these impaired assets is considered a noncash expense.

2. Prepare a 350- to 700-word paper comparing and contrasting lease verses purchase options. In your paper, discuss the following questions:

• What is debt financing? Provide at least two examples.
• What is equity financing? Provide at least two examples.
• Which alternative capital structure is more advantageous? Why?

Format your paper consistent with APA guidelines. Be sure to properly cite your references. If you used an electronic source, include the URL.