FIN/370
Miss Tiia
week_5_questions.xlsxCh 18 #3
| 3. Changes in the Operating Cycle [LO1] Indicate the effect that the following will have on the operating cycle. Use the letter I to indicate an increase, the letter D for a decrease, and the letter N for no change: | ||
| a. | Average receivables goes up | I |
| b. | Credit repayment times for customers are increased. | I |
| c. | Inventory turnover goes from 3 times to 6 times. | D |
| d. | Payables turnover goes from 6 times to 11 times. | N |
| e. | Receivables turnover goes from 7 times to 9 times. | D |
| f. | Payments to suppliers are accelerated. | N |
Ch 18 #11
| 11. Calculating the Cash Budget [LO3] Here are some important figures from the budget of Nashville Nougats, Inc., for the second quarter of 2015: | ||||||
| The company predicts that 5 percent of its credit sales will never be collected, 35 percent of its sales will be collected in the month of the sale, and the remaining 60 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase. In March 2015, credit sales were $235,000 and credit purchases were $161,300. Using this information, complete the following cash budget: | ||||||
| April | May | June | ||||
| Beginning Cash Balance | $ 135,000.00 | |||||
| Cash Receipts | ||||||
| Cash Collections from credit sales | ||||||
| Total cash available | ||||||
| Cash disbursements | ||||||
| Purchases | ||||||
| Wages, Taxes, and expenses | ||||||
| Interest | ||||||
| Equipment purchases | ||||||
| Total cash disbursements | ||||||
| Ending cash balance |
CH 20 # 8
| 8. Size of Accounts Receivable [LO1] The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, four days past due. If annual credit sales are $9.75 million, what is the company’s balance sheet amount in accounts receivable? | ||
| net term | 30 | |
| days past due | 4 | |
| average Coll/ days sales outstanding | 34 | |
| Receivables Turnover | 10.7352941176 | times |
| 365 days/ DSO (34) | ||
| Accoutns Receivables | $ 908,219.18 | |
| Credit Sales / Turnover |
CH 20 # 14
| 14. Credit Policy Evaluation [LO2] The Snedecker Corporation is considering a change in its cash-only policy. The new terms would be net one period. Based on the following information, determine if the company should proceed or not. The required return is 2.5 percent per period. | |||
| 3390 | 3280 | 110 | extra units |
| $ 75.00 | $ 38.00 | $ 37.00 | gross profit per unit |
| $ 4,070.00 | |||
| $ 6,560.00 | |||
| $ 10,630.00 | |||
| PV | $ 425,200.00 | ||
| $ 239,440.00 | |||
| $ 4,180.00 | |||
| New Cost | $ 243,620.00 | ||
| NPV | $ 181,580.00 | COMPANY SHOULD PROCEED |
CH 21 # 4
| 4. Using Spot and Forward Exchange Rates [LO1] Suppose the spot exchange rate for the Canadian dollar is Can$1.09 and the six-month forward rate is Can$1.11. | |||
| a. Which is worth more, a U.S. dollar or a Canadian dollar? | |||
| US Dollar | |||
| b. Assuming absolute PPP holds, what is the cost in the United States of an Elkhead beer if the price in Canada is Can$2.50? Why might the beer actually sell at a different price in the United States? | |||
| $ 2.50 | $ 1.09 | $ 2.29 | The beer might sell at different price in US due to it being exported |
| c. Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar? | |||
| Premium | |||
| d. Which currency is expected to appreciate in value? | |||
| US Dollar | |||
| e. Which country do you think has higher interest rates—the United States or Canada? Explain | |||
| Canda's interest rate is .5%. US' interest rate is .75% | |||
| Why? Got rate info from http://www.global-rates.com/interest-rates/central-banks/central-banks.aspx |
CH 21 # 7
| 7. Interest Rates and Arbitrage [LO2] The treasurer of a major U.S. firm has $30 million to invest for three months. The interest rate in the United States is .31 percent per month. The interest rate in Great Britain is .34 percent per month. The spot exchange rate is £.573, and the three-month forward rate is £.575. Ignoring transaction costs, in which country would the treasurer want to invest the company’s funds? Why? | |
| Spot | 0.573 |
| Forward | 0.575 |
| US Interest | 31% |
| Britain Interest | 34% |
| 3 of months | 3 |
| 0.547470297 | |
| 0.5493811881 | |
| Investment Amt | $ 30,000,000.00 |
| US Interest | 31% |
| 30 | |
| 17.19 | |
| Investment Amt | $ 30,000,000.00 |
| Britain Interest | 34% |
| 30 | |
| 17.25 | |
| INVEST IN THE UNITED STATES |
CH 26 # 1
| 1. Calculating Synergy [LO3] Pearl, Inc., has offered $357 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $319 million as an independent operation. If the merger makes economic sense for Pearl, what is the minimum estimated value of the synergistic benefits from the merger? | |
| Synergy benefits = Offered Value – market value | |
| Offered Value | $ 357,000,000.00 |
| Market Value | $ 319,000,000.00 |
| Synergy Benefits | $ 38,000,000.00 |
CH 26 #2
| Chapter 26 | ||||
| Question 2 | ||||
| Input Area: | ||||
| Firm X | Firm Y | |||
| Total earnings | $ 87,000 | $ 11,000 | ||
| Shares outstanding | 35,000 | 12,000 | ||
| Per-share values | ||||
| Market | $ 57 | $ 19 | ||
| Book | $ 7 | $ 3 | ||
| Merger premium | $ 6 | |||
| Output Area: | ||||
| Asset from X (book value) | $ 245,000 | |||
| Asset from Y (market value) | $ 228,000 | |||
| Purchase price of Y | $ 300,000 | |||
| Goodwill | $ 72,000 | |||
| Total assets XY = Total equity XY | $ 545,000 | |||
