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Bernie’s Bike Shop receives the following trade discounts: 35/25/15. The vendor’s price list indicates that 35 percent off list price is for purchasing bikes in quantities of 100 or more, 25 percent off list price is for assembling the bikes for customers, and 15 percent is for sales promotion and local advertising. a. If the manufacturer’s list price is $470, what should Bernie pay for each bike if he orders 110 bikes at a time, assembles the bikes, and displays and advertises them? b. What is Bernie’s single equivalent discount rate? c. How much will Bernie pay the manufacturer for each bike if he orders ten bikes at a time and takes advantage of the other discounts?
In exercise 13, Bernie is given terms of 4/15 n/30, and he pays by day 15.
a. How much will he pay the manufacturer for the order of 110 bikes?
b. For how much will the manufacturer credit Bernie’s account?
c. If Bernie has a cash flow problem and waits until day 30 to pay the manufacturer, what is his effective rate of financing for the year?
A manufacturing system costs $150,000. Its lifetime is 15 years and at that time its salvage value will be $25,000. Your Minimum Attractive Rate of Return is 18%. How much net income does the system need to provide in order for it to be an attractive..
Consider a binomial model S(0) = 100 and r = .01 and two possible return values m1 = .05 and m2 = −.03. Find the (time 0) value of a European call with expiry time at step 5 and strike price X = 105. Find the (time 0) value of a European put with exp..
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What is the current value of the swap to the party paying floating? What is its value to the party paying fixed? - Explain what a swap rate is. What is the relationship between swap rates and par yields?
You have been asked to determine whether the following project is to be taken by your company. The cost of the project is to be incurred over two years. The cash outflow in year 0 will be $160,000 and in year two $190,000. Determine if the project sh..
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