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1. AZ Inc. had credit sales of $6,500,000 last year and its days sales outstanding was DSO = 50 days. What was its average receivables balance, based on a 365-day year?
2. Firm Q has $350 million of sales, $60 million of inventories, $70 million of receivables, and $45 million of payables. Its cost of goods sold is 75% of sales. Calculate its current cash conversion cycle based on the available information.
3. Estimate the cash conversion cycle based on the following available information. Revenue = $235 million Cost of goods sold = $211.5 million Account receivables = $65 million Inventories = $100 million Account payables = $80 million
4. A company has a days sales outstanding (DSO) of 80 days (on a 365-day basis per year). All sales are on credit. It has an account receivable of $120 million and inventory of $150 million. a) What is the inventory turnover ratio? b) If the payables deferral period is 65 days, what is the length of the cash conversion cycle?
Edwards manufacturing company is considering replacing one machine with another. The old machine was purchased 3 years ago for an installed cost of $10,000. The firm is depreciating the machine under MARCS, using a 5-year recover period. The new mach..
Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.5% and the market risk premium is 6%, how much is the additional premium that Ethier’s shareholders require to ..
Suppose the initial margin on heating oil futures is $8,900, the maintenance margin is $8,000 per contract, and you establish a long position of 14 contracts today, where each contract represents 47,000 gallons. Tomorrow, the contract settles down $...
We are examining a new project. We expect to sell 5,100 units per year at $65 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $65 × 5,100 = $331,500. If success and failure are equally lik..
If you are temporarily bearish on the stock market, how many contracts should you sell to fully eliminate your exposure over the next six months?
Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13%, and the risk-free rate is 7%. By how much does the required return on the riskier stock exceed that on the less risky stock?
What is the difference between an asset purchase and a stock purchase? What is the difference between an operational restructuring and a financial restructuring?
You are the financial analyst for a tennis racket manufacturer. The company is considering using graphite like material in its tennis rackets. The company has estimated the information in the following table about the market for a racket with the new..
The preferred stock of gator industries sells for $35.66 and pays $2.74 per year in dividends. What is the cost preferred stock financing? How should this cost be incorporated into the NPV of the project being financed?
Using a 5% discount rate, calculate the Net Present Value, Payback, Profitability Index, and IRR for each of the investment projects below. Assuming a budget of $2,000,000 what are your recommendations for the above problem? Explain.
Star Labs has a debt-equity ratio of 1.28 and a tax rate of 30 percent. The firm does not issue preferred stock. What is the weighted average cost of capital?
Discuss the criminal liability of David and Newtown Motor Co Ltd. What defences may be available to David and Newtown Motor Co Ltd if they are prosecuted? What advice would you give Newtown Motor Co Ltd to help it avoid prosecution in the future?
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