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Suppose that last year a firm had a DSO of 35 days and annual revenues equal to 10,000,000$. The treasury department has made it a goal to reduce the DSO to 30 days, while holding constant revenues. If this reduction is realized, then calculate the following:
a. The dollar change in receivables
b. The implied reduced financing cost of the receivables (Assume a borrowing rate of 2.5%)
c. The change in the OC and CCP given that next year's DIH and DPO are expected to equal 45 days and 75 days, respectively.
What is the value of a share of a firm's stock when the firm is expected to pay a $2.80 per share dividend at the end of each year and the annual discount rate is 7.5 percent?
You are building a pipeline which will generate its first annual cash flow of $2m exactly 5 years from today. As it ages, the volume it transports, and hence the cash flows it creates, will decline by 3% per year. Exactly 27 years from today, this pi..
Sixth Fourth's Bank is trying to determine its cost of debt. The firm has a debt issue outstanding with nine years to maturity that is quoted at 105 percent of face value. The issue makes semiannual payments and has an embedded cost of 4.1 percent an..
Double taxation on profits is:
Suppose that you are the sole owner of an all-equity firm, the assets of which are worth $500,000. The ROA is 15% per year paid as a dividend to you. If you have the firm issue $100,000 of debt at 6%, the interest expense will be paid by the firm out..
an exchange rate is currently 0.8000. the volatility of the exchange rate is quoted as 12 and interest rates in the two
A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk premium on the corporate bond?
How many U.S. dollars must be raised if payment is due today, is the dollar appreciating or depreciating against the yen? Explain - How many U.S. dollars must be raised if payment is due in 90 days?
The cost of debt is lower than the costs of stocks. Cost of Preferred stock is higher than the cost of common stocks.
A large cow barn will cost $150,000 to build today and you figure it will add $18,000 per year to your after-tax cash flows for the next ten years. If the salvage value of the building is 50% after ten years and the cost of capital is 7%, what is the..
An individual retirement account, or IRA, earns tax-deferred interest and allows the owner to invest up to $5000 each year. Joe and Jill both will make IRA deposits for 30 years (from age 35 to 65) into stock mutual funds yielding 9.4%. Joe deposits ..
Construct a pro-forma income statement for next year based on the assumption that sales will grow by 2.0 percent next year - What is the projected free cash flow for December 31, 2015?
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