FINC400 full course (American Public university)

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Instructions

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FINC 400 Principles of Financial Management

Week 3 Homework Problems

Complete the following problems:

Problem 6-4

Problem 7-2

Problem 8-10

Problem 6-8

Problem 7-7

Problem 8-14

Problem 6-10

Problem 7-13

Problem 8-17

Master-11/2011 kT

Problem 6-4 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
Solution:
		Antivirus, Inc.
	$2,000,000	Sales
	12%	Profit Margin
		Net Income
		Dividends @	25%
		Increase in Retained Earnings
	$430,000	Increase in Assets
		Increase in Retained Earnings
		External Funds Needed

Problem 6-8 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
Biochemical Corp.
Required 3 year financing	$500,000
Interest rate per year	10.60%
# of years	3.00
Short-term financing - year 1	7.25%
Short-term financing - year 2	11.90%
Short-term financing - year 3	8.15%
Solution:
Cost of Three Year Fixed Cost Financing		Show your work!
Cost of Three Year Variable Short-term Financing
3 Year Total Interest Cost =

Problem 6-10 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
	Hogan Surgical Instruments Company
a)	Most Aggressive
		Assets	Expected Return on Assets
	Low liquidity/high return	$2,000,000	18%
	Short-term financing	$2,000,000	10%
	Anticipated return
b)	Most Conservative
		Assets	Expected Return on Assets
	Low liquidity/high return	$2,000,000	14%
	Long-term financing	$2,000,000	12%
	Anticipated return
c)	Moderate approach
		Assets	Expected Return on Assets
	Low liquidity/high return	$2,000,000	18%
	Long-term financing	$2,000,000	12%
	Anticipated return
d)

Problem 7-2 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
Neon Light Company of Kansas City		Solution:
Daily collections	$2,000,000	a)
Days speed up	1.50		Additional collections =
Daily disbursements	$1,000,000
Days slow down	0.50
Interest rate	9%
			Delayed disbursements =
			Freed-up Funds =
		b)	Freed-up Funds =
			Interest Rate =
			Interest on Freed-up Funds =
		c)

Problem 7-7 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
	Eco-Friendly Products
	Credit Sales		$900,000
	Avg. Collection Period		30
	Days in year		360
Solution:
	Annual credit sales	/	Days in year	=	Credit sales a day
		/		=
	Avg. daily credit sales	x	Avg. Coll. Period	=	Avg. Acc. Receivable
		x		=

Problem 7-13 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
	Fisk Corp.
	Expected Sales	75,000
	Ordering Cost	$8
	Carrying Cost	$1.20
Solution:		Show your work!
a)	EOQ =
b)	Orders =
c)	Avg. Inventory =
d)	# of orders x ordering cost =
	Avg. Inventory x carrying cost =
			Total Cost =

Problem 8-10 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
		Talmud Book Company
		Amount Borrowed	$16,000
		Interest Rate	9%
		Days loan outstanding	30
		Days in year (360 or 365)
Solution:			Show your work!
	Dollar cost of loan =

Problem 8-14 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
Dade Company		Solution:		Show your work!
Principal	$300,000	1)	Effective rate of interest with 20% compensating balance =
Interest	$27,000
Compensating Balance	20%
Days in year (360 or 365)
Days Loan Outstanding	360
Annual # Payments	12	2)	Effective rate for installment loan with compensating balance =
Total # of Payments	12

Problem 8-17 - Refer to problems at the end of the chapter for details and instructions:
Use template to complete the problem:
Information		Solution:		Show your work!
Principal	$5,000,000	a)	Simple interest with 10% compensation balance =
Interest	14%
Compensating Balance	10%
Days in year		b)	Discounted interest =
Days Loan Outstanding	360
Annual # Payments	12
Total # of Payments	12	c)	An installment loan with 12 payments =
Compensating Balance (d)	5%
		d)	Discounted interest with 5% compensating balance =