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Initiating a cash discount; a company is considering offering a 1% discount for payment within 15 days, the current average collection period is 60 days. Sales are 40,000 units and the selling price is $42 per unit. Variable cost per unit is $31. Thefirm expects that the change in credit terms will result in an increase in sales to 43,000 units. That 70% of the sales will take the discount and average collection period will fall to 30 days. If the firms required rate of return on equal-risk investments is 25% should the proposed discount be offered?
The additional profit contribution from additional sales is $___.
Both bond A and bond B have 7.6 percent coupons and are priced at par value. Bond A has 8 years to maturity, while bond B has 16 years to maturity. a. If interest rates suddenly rise by 2 percent, what is the percentage change in price of bond A and ..
If US Congress decided to LOWER the personal income tax rates would you expect: dividend yields of US companies increase or decrease? Why do some companies utilize lower D/V ratio than that predicted by the optimal trade-off between tax benefits of d..
Assume 20% of Turks's sales are for cash. The remaining 80% are credit sales;- Compute the budgeted cash receipts for June.
Orange Logistic is thinking of opening a new warehouse, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new warehouse. No new working capi..
A 30-year corporate bond sold to investors at par ($1000) with a 10 percent coupon rate is called sixteen years later at a 12 percent call premium. At the time of call, prevailing rates on comparable securities were 8 percent. If the bond's holder re..
An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital is 12 percent. Determine whether you would accept or reject the proje..
Suppose you are a financial student interviewing for a job and the interviewers ask you what would cause an increase in net working capital. Which of the following would be the best response?
The Simmons Company expects earnings of $30 million next year. Its dividend payout ratio is 40 percent, and its proportion of debt (debt/assets ratio) is 55 percent. Simmons uses no preferred stock. What amount of retained earnings does Simmons expec..
Raylan Givens borrows $150,000 to buy a house. The adjustable rate mortgage carries a 1.5 percent rate for the first 3 years. After that the rate will change annually to reflect market conditions. What is Raylan’s initial mortgage payment? What is th..
At an output level of 15,400 units, you have calculated that the degree of operating leverage is 2.00. The operating cash flow is $58,000 in this case. Ignoring the effect of taxes, what are fixed costs? What will the operating cash flow be if output..
Bond X is non callable and has 10 years to maturity, a 9% semi annual coupon, and a $1000 par value. Your required return on Bond X is 5%, and if you buy it, you plan to hold it for 3 years. You (and the market) have expectations that in 3 years, the..
Barrett Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Barrett does not pay any dividends, and it has no plans to pay dividends in the near future. What is an estimate of Bar..
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