Tyvo is a separate legal entity that securitizes receivables for a variety of financial institutions. It was formed with an investment of $100 million. Qualitative analysis is inconclusive regarding whether Tyvo is a variable interest entity. Quantitative analysis indicates that Tyvo's expected future cash flows are as follows, in millions (assume all cash flows occur at the end of the first year):
$$\begin{array} { | c | c | }
\hline \text { Expected Cash Flows } & \text { Probability } \
\hline \$ 84 & 0.40 \
\hline 144 & 0.60 \
\hline
\end{array}$$ A risk-adjusted discount rate of 20% is appropriate.
Tyvo is likely to be considered a variable interest entity, per U.S. GAAP, if its equity financing is less than what amount?

Question

Tyvo is a separate legal entity that securitizes receivables for a variety of financial institutions. It was formed with an investment of $100 million. Qualitative analysis is inconclusive regarding whether Tyvo is a variable interest entity. Quantitative analysis indicates that Tyvo's expected future cash flows are as follows, in millions (assume all cash flows occur at the end of the first year):
$$\begin{array} { | c | c | } 
\hline \text { Expected Cash Flows } & \text { Probability } \
\hline \$ 84 & 0.40 \
\hline 144 & 0.60 \
\hline
\end{array}$$ A risk-adjusted discount rate of 20% is appropriate.
Tyvo is likely to be considered a variable interest entity, per U.S. GAAP, if its equity financing is less than what amount?

Quizplus · Accepted Answer

The Answer of Tyvo is a separate legal entity that securitizes receivables for a variety of financial institutions. It was formed with an investment of $100 million. Qualitative analysis is inconclusive regarding whether Tyvo is a variable interest entity. Quantitative analysis indicates that Tyvo's expected future cash flows are as follows, in millions (assume all cash flows occur at the end of the first year):
$$\begin{array} { | c | c | } 
\hline \text { Expected Cash Flows } & \text { Probability } \
\hline \$ 84 & 0.40 \
\hline 144 & 0.60 \
\hline
\end{array}$$ A risk-adjusted discount rate of 20% is appropriate.
Tyvo is likely to be considered a variable interest entity, per U.S. GAAP, if its equity financing is less than what amount?

Tyvo Is a Separate Legal Entity That Securitizes Receivables for a Variety