Fin610 Week 3 Problems 1-3 Chapter 8
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fin610_module_3_homework.xlsProblem One
| Module Three Homework Assignment | |
| Student's Name: | |
| Problem 1 (from Chapter 8) | |
| Allied Shipping, Incorporated specializes in the business of shipping products overseas. Suppose you are the company’s finance manager. The company has decided it is time to review its current relationship with its bank. The first step to complete your analysis is to look at the analysis statement from last month and you requested a copy of the analysis statement for the month of June 2012 regarding service charge fees assessed. The bank has provided the analysis via fax and you are having difficulties in reading several of the numbers. Several attempts to contact the bank have been unsuccessful and you are pressed for time complete the analysis. Therefore, you have to manually complete the analysis based on the information that you are able to clearly see on the fax by filling in the blank cells. The Earnings Credit rate is 5% and the Reserve Requirement is 10%. Also, June 2012 has 30 days. Complate parts a. and b. below. | |
| a. | Fill in the missing line items in dollar amounts missing below. (Note: refer to Exhibit 8-14 in your text) |
| b. | What recommendations would you have for Allied Shipping? |
Problem Two
| Module Three Homework Assignment | |
| Problem 2 (from Chapter 8) | |
| Note: Refer back to Problem 1 from Chapter 8 of your text. | |
| The capital budgeting approach in the financial decision-making process requires that we compare the present value of incremental cash inflows with the present value of incremental cash outflows. What would be your recommendation if the initial investment for the company was $200,000 as opposed to $225,000 using the assumptions? (Current days float and New days float remain the same as in Problem 1). (Notes: you must first compare the difference between the two perpetuities cash flow's to arrive at the incremental cash flow. Use at least four (4) decimal places in your calculations and round your final answers to two decimal places. ) | |
| Assume that the opportunity cost of funds remains at 14% (as in Problem 1). | |
| Assume: New Initial Investment = $200,000 | |
| Calculate the new system PV (6 days float) using the New Initial Investment of $200,000 at 14%: | |
| Calculate the current system PV (7 days float) using the New Initial Investment of $200,000 at 14%: |
Problem Three
| Module Three Homework Assignment | |
| Problem 3 (from Chapter 8) | |
| In April 2012, The Hersey Company uses direct sends which the bank charges a service fee of $100.00 The bank's earned credit ratio and reserve requirements are 5% and 12% respectively. Calculate the Required Compensating Balance (RCB) by the bank for the Hersey Company for April 2012 (Hint: refer to the Equation for calculating Compensating Balances in your text on page 302 and carry out your decimals eight (8) places in your calculations). |
References
| References |
