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Raymond Manufacturing faces a liquidity crisis-it needs a loan of $100,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short-term lender. The firm's accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The book value of the inventory is $300,000, of which $120,000 is finished goods. (Note: Assume a 365-day year.) (1) City-Wide Bank will make a $100,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 12% on the outstanding loan balance plus a 0.25% administration fee levied against the $100,000 initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed over the month is expected to be $75,000. (2) Sun State Bank will lend $100,000 against a floating lien on the book value of inventory for the 1-month period at an annual interest rate of 13%. (3) Citizens' Bank and Trust will lend $100,000 against a warehouse receipt on the finished goods inventory and charge 15% annual interest on the outstanding loan balance. A 0.5% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $60,000. A.) Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $100,000. B.) Which plan do you recommend? Why? C.) If the firm had made a purchase of $100,000 for which it had been given terms of 2/10 net 30, would it increase the firm's profitability to give up the discount and not borrow as recommended in part b? Why or why not?
Investors buying the bonds today will earn a yield to maturity of 11.02 percent. At what price will the bonds sell in the marketplace?
Keona Corporation pays 2800000 for a tract of land with two buildings on it. Keona consider to demolish building one and build a new store.
Make a final payoff diagram for a stock and a bond.
Now find the NPV of this project when taking the abandonment option into account.
Suppose you are an analyst studying Beranek Technologies, which was founded ten years ago. It has been profitable for the last five years, but it has needed all of its earnings to support growth and thus has never paid a dividend.
What equal, annual amount must you save at the end of each of the next 15 years to achieve your objective, assuming you currently have $10,000 available to meet your goal?
However, it could forgo the discounts, pay on the 90th day, and thereby obtain the needed $500,000 in the form of costly trade credit. What is the effective annual interest rate of this trade credit?
Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $86,500. Swimkids expects sales of $265,300 next year. What is Swimkids's margin of safety?
Explain the funding method for social security's payroll tax. Disuss the possibility for tax shifting (or tax incidence) between an employer and an employee. Give reasons why or why not tax shifting would occur, with social security's payroll tax.
Preparation of Balance Sheet - Prepare in good form a balance sheet as of February 28, 2001.
Discuss at least two challenges the budget analyst should consider when preparing a trend analysis over a five-year period. Justify your response.
Fox uses the net present value method and has a discount rate of 11.25%. Will Fox accept the project?
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