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A firm estimates sales of $150,000 in December, $175,000 in January; $125,000 in February, $200,000 in March, $250,000 in April; $180,000 in May; and $200,000 in June. November sales were $125,000. The firm typically collect 20% of its sales in cash; 50% are accounts receivable paid the month after the sale; and 30% are accounts receivable paid two months after the sale. The firm’s cost of goods sold (raw materials) amounts to 70% of its sales. The raw materials are ordered two months in advance of expected sales, but are paid for one month after they are ordered. The firm has fixed costs of $3,000 per month for rent and $12,000 per month for other fixed operating costs. The firm has $30,000 per month in salary expense. Assume a starting cash balance of $0 but a minimum cash balance of $10,000 going forward. Prepare the cash budget for January through April. What is the maximum amount of short-term loan the firm will need during the relevant time period?
Your firm is considering a new product development. An outlay of $110,000 is required for equipment, and additional net working capital of $5,000 is required. Implementing the project will generate a time zero investment tax credit benefit of $3,000 ..
Credit Card Company will charge you 1.25% of interest/month for the unpaid balance. Your unpaid balance is $2000 for 2 years. Find the actual effective rate of interest/year that you are paying?
Hollin Corporation has bonds on the market with 23.5 years to maturity, a YTM of 7 percent, and a current price of $1,051. The bonds make semi-annual payments. What must the coupon rate be on these bonds?
The following table shows betas for several companies. Calculate each stock’s expected rate of return using the CAPM. Assume the risk-free rate of interest is 7%. Use a 8% risk premium for the market portfolio.
Discuss how businesses can do at least two of the following; support, maintain, or decrease the quality of life for society. Discuss how non-profit organizations can do at least two of the following; support, maintain, or decrease the quality of life..
You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 11 percent, which is paid semiannually. Compute the price of the bonds based on semiannual ana..
Travis, Inc., has sales of $387,000, costs of $175,000, depreciation expense of $40,000, interest expense of $21,000, and a tax rate of 35 percent. What is the net income for the firm?
Southern Mfg., Inc., is currently operating at only 86 percent of fixed asset capacity. Current sales are $620,000. How fast can sales grow before any new fixed assets are needed?
The company has a loan Argentinian Grill at 7 years of $ 23.500 with the local bank. His plan is to start paying the loan in seven equal installments beginning on this day. If the interest rate is 8.4%, calculates the annuity payment.
How much debt is outstanding in a firm that has calculated the present value of a perpetual tax shield to be $300,000 if the tax rate is 35% and the debt carries a 10% rate of return?
A firm reported an ROE of 19 percent. The firm's debt ratio was 45 percent, sales were $12 million, and the capital intensity ratio was 1.1 times. Calculate the net income for the firm.
Suppose a firm estimates its WACC to be 10%. Should the WACC be used to evaluate all of its potential projects, even if they vary in risk? If not, what might be "reasonable" costs of capital for average-, high-, and low-risk projects?
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