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1. Cash discount versus loan: Joanne Germano works in an accounts payable department of a major retailer. She has attempted to convince her boss to take the discount on the 1/15 net 65 credit terms most suppliers offer, but her boss argues that giving up the 1% discount is less costly than a short term loan at 7%. Assume a 365 day year. What is the cost of giving up the discount and who is correct?
2. Over the last several years, Grainger had about $2 billion in debt on its balance sheet and an MVE of $15 billion. During this period, the estimated beta was 0.75. Management is debating about issuing new debt to that would result in a debt to equity ratio of 0.33. What would Grainger’s beta estimate be under this scenario? Assume a tax rate of 35%
Amortization of Premium or Discount Bonds payable are dated January 1, 2014, and are issued on that date. The face value of the bonds is $125,000, and the face rate of interest is 8%. Using the effective interest amortization method, what amount shou..
A nuclear power plant is planning to replace the outdated equipment with more environmental-friendly equipment.
The EBIT, Depreciation, and tax rate of a firm are $20 million, $2 million and 35% respectively. Its sales rise $5, and its inventory ratio to sales is 40%, while its accounts receivable to sales is 45%, and its accounts payable to sales is 35%. We a..
FIN201 - Financial Management - Explain how do you find the value of a bond, and why do bond prices change - explain how inflation affects interest rates?
Financial executives insist that there should be no separation between an individual's personal ethics and his or her business ethics. How do ethics codes apply to project selection and capital budgeting? What are the potential risks to a company of ..
The loan will be repaid in one lump sum at the end of the four year period. APR = _____%
Supernomal growth discounted model. Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2, a dividend in year 2 of $3, and a dividend in year 3 of $4. After year 3, dividends are expected to grow at the rate of 7% per year.
Which of the following is true regarding Investment Banks? When Glass-Steagal was repealed in 1999, commercial banks and Investment banks had to be separate entities.
Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much? Sales $50,000 Variable Costs $7,400 Fixed Costs $25,000
Mooradian Corporation’s free cash flow during the just-ended year (t = 0) was $150 million, and its FCF is expected to grow at a constant rate of 5.0% in the future. If the weighted average cost of capital is 12.5%, what is the firm’s total corporate..
Find problems inherent in Simpsons WACC calculation and what can you suggest to solve problems found - Simpson used the CAPM to estimate the cost of common stock.
Slow Watch Company has a levered beta of 1.10, its capital structure consists of 44% debt and 56% equity, and its tax rate is 40%. What would Slow Watch's beta be if it used no debt, i.e., what is its unlevered beta?
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