Short-term financing needs-describe mechanism-methodology

Assignment Help Financial Accounting

Reference no: EM13826348

Assignment 1: Discussion—Short-Term Financing Needs

After reading your report, as well as comments by others on the team, the Genesis Energy team began to understand the importance of cash flow and financing in high-growth scenarios. The Genesis Energy accountant suggested that the focus should be on developing a financial strategy that would ensure operational needs are met through short-term financing. The Genesis Energy team instructed Sensible Essentials to explain in basic terms the factors and mechanics necessary to determine short-term financing needs.

As the finance expert for Sensible Essentials, do the following:

Explain the concept of working capital and its importance to Genesis Energy.

Describe the mechanism and methodology used to ensure that operational needs are met through short-term financing. Explain why this methodology is important to Genesis Energy.

Explain how working capital represents the assets that are needed to carry out the day-to-day operation and how working capital can act as a source of financing or increase the need for financing.

In your response, be sure to consider the time value of money and the relative advantages and disadvantages of short-term loans versus internally generated funds.

Please complete the mini case.

Build a Model: The Time Value of Money

Start with the partial model in the file Ch04 P35 Build a Model.xls from the textbook’s Web site. Answer the following questions, using a spreadsheet model to do the calculations.

a. Find the FV of $1,000 invested to earn 10% annually 5 years from now. Answer this question first by using a math formula and then by using the Excel function wizard.

b. Now create a table that shows the FV at 0%, 5%, and 20% for 0, 1, 2, 3, 4, and 5 years. Then create a graph with years on the horizontal axis and FV on the vertical axis to display your results.

c. Find the PV of $1,000 due in 5 years if the discount rate is 10% per year. Again, work the problem with a formula and also by using the function wizard.

d. A security has a cost of $1,000 and will return $2,000 after 5 years. What rate of return does the security provide?

e. Suppose California’s population is 30 million people and its population is expected to grow by 2% per year. How long would it take for the population to double?

f. Find the PV of an ordinary annuity that pays $1,000 at the end of each of the next 5 years if the interest rate is 15%. Then find the FV of that same annuity.

g. How would the PV and FV of the above annuity change if it were an annuity due rather than an ordinary annuity?

h. What would the FV and PV for parts a and c be if the interest rate were 10% with semiannual compounding rather than 10% with annual compounding?

i. Find the PV and FV of an investment that makes the following end-of-year payments. The interest rate is 8%.

Year Payment

1 $100

2 $200

3 $400

j. Suppose you bought a house and took out a mortgage for $50,000. The interest rate is 8%, and you must amortize the loan over 10 years with equal end-of-year payments. Set up an amortization schedule that shows the annual payments and the amount of each payment that repays the principal and the amount that constitutes interest expense to the borrower and interest income to the lender.

Reference no: EM13826348

Questions Cloud

Write a literature review on currency crisis : The problem is a literature review belongs to Economics and it is explains about Currency Crisis. Currency crisis arises out of abrupt changes in the nominal exchange rates in the economy.

Investment has the cash flows : An investment has the following cash flows. Should the project be accepted if it has been assigned a required return of 9.5%? Why or why not?

Calculating operating income before tax-free cash flow : If the firm's tax and finance methods of depreciation are the same and $15 of depreciation was deducted in the computation of the beforeâ€tax operating income, what is this firm's free cash flow?

Determine the cost of debt and equity for genesis energy : Considering Genesis Energy’s aggressive growth plan, Sensible Essentials suggested that its client should broaden the scope of financing beyond short-term loans and consider long-term financing options. Determine the cost of debt and equity for Genes..

Short-term financing needs-describe mechanism-methodology : After reading your report, as well as comments by others on the team, the Genesis Energy team began to understand the importance of cash flow and financing in high-growth scenarios. Describe the mechanism and methodology used to ensure that operation..

Implementation and limitation of s-curve analysis : Implementation And Limitation Of S-Curve Analysis As A Predictive Tool

How these strengths can transform a person into a leader : Write an essay about your strengths and reflections on your strengths with specific examples. Use literature in describing transformational leadership and compare your strengths with transformational leadership

Characteristics of gores organizational structure : Identify the characteristics of Gores Organizational structure with the help of examples from the case study, what type of Organization structure is found at Gores Associates.

Analyze the effect of an increase in government expenditure : These problems from Macroeconomics and the problems deal with the expenditures of the whole economy. Various factors such as money supply, net export, governmental policy and aggregate demand.

User Account

All Pages