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1. The Chalfant Company is considering the use of commercial paper to finance a seasonal need for funds. A commercial paper dealer will sell a $25 million issue maturing in 91 days at an annual interest rate of 8.5 percent (deducted in advance). The fee to the dealer for selling the issue is $75,000. Determine Chalfant's annual financing cost of this commercial paper issue.
2. The Boone Furniture Company is considering factoring its receivables. Its average level of receivables is $4 million, and its average collection period is 70 days. Boone's bad-debt losses average $9,000 per month. (Assume 30 days per month.) Factoring receivables will save the company $3,000 per month through the elimination of its credit department. The factor charges a 2 percent commission and requires a 10 percent reserve for returns and allowances. Boone can borrow funds from the factor at 3 percentage points over the prime rate, which is currently 9 percent.
a. Determine the amount of usable funds Boone can obtain by factoring its receivables.
b. Calculate the annual financing cost of this arrangement.
You are evaluating a project for your company. You estimate the sales price to be $220 per unit and sales volume to be 3,200 units in year 1; 4,200 units in year 2; and 2,700 units in year 3. The project has a three-year life.
You purchased one EAW, Inc. 6 percent coupon bond one year ago for $1,020. The bond makes annual payments and matures four years from now. You sell the bond today when the required return is 5 percent. The inflation rate was 2.8 percent over the past..
Conduct a What-If Analysis: This what-if analysis concerns an unforeseen circumstance that could impact the company''s current health as well as its future plans.
Shelf registration
What is the value of a bond that has a par value of $1000, a coupon rate of 17.24% paid annually and that matures in 8 years? (Assume a required rate of return on the bond is 13.53 percent.)
The present value of the following cash flows is known to be $6,939.91; $500 today, $2,000 in 1 year, and $5,000 in 2 years. What discount rate is being used?
Despite the crash of 2008 and 2009, real estate remains a solid investment over time. Why might this be the case? What is it about real estate that makes it a good investment? What kinds of real estate investment vehicles exist
Present a brief side-by-side comparison of the commentary in the MD&A of 2013 to that of 2012. Were the same business drivers discussed? Were they assigned the same importance by management? Discuss any variations you observed, and the possible reaso..
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $20,600. Use of the truck wil..
Papier Nouveau, a distributor of commercial printing supplies. As the Director of HR for Papier Nouveau, you are responsible for calculating monthly incentives.
Calculate the dividends per share and Determine the net asset value of the firm should the company not exercise the option to repurchase its shares.
Beaverton Corporation has debt/assets ratio of .25, its cost of debt is 7% and that of equity 12%. The tax rate of Beaverton is 30%. The company is not growing and it has a dividend payout ratio of 100%. Its dividend per share is $2.5. Beaverton has ..
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