Imagine that Commodore has taken out a multimilliondollar loan that must be repaid next year. How might the lender react if it learned that Commodore was using the book-and-hold method to make revenues look higher than they really are?
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Imagine that Commodore has taken out a multimilliondollar loan that must be repaid next year. How might the
lender react if it learned that Commodore was using the
book-and-hold method to make revenues look higher
than they really are?
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- Suppose the firm makes the change but its competitors react by making similar changes to their own credit terms, with the net result being that gross sales remain at the current 1,000,000 level. What would be the impact on the firms after-tax profitability?An insurance company specializes in selling warranties for consumer electronics products. For selling these warranties they receive cash up front, but later they must pay out cash for policyholders who file claims. Suppose a particular product they sell brings in $1 million in cash right away but requires them to pay $1.2 million in claims a year later. The firm's cost of capital is 10%. Calculate the IRR that the firm earns on the product and comment on whether it is a good investment.Company A is facing a liquidity crisis and decided to draw on its credit line to increase cash holdings. The credit line loan has a maturity of 3 years and no payments are due before 3 years, other than interest payments. What should happen to this company's current, quick and cash ratios?
- please not use of excel.and correctly solve if you know then explains Q)Suppose that you borrowed $18,306 for 36 months to buy a car last year at 5.5% APR compounded monthly. What's the present value of the remaining payments after you made 11 monthly payments?Company A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $12,245, and they can borrow the money from Bank B, which has offered to lend the firm $12,245 for 1 months at an APR of 13% (compounded). The loan has a 1.54% loan origination fee. What would be the cost for Company A if they decide to borrow from Bank B?Eugene Wright is CFO of Caribbean Cruise Lines. The company offers luxury cruises. It’s near year-end, and Eugene is feeling kind of queasy. The economy is in a recession, and demand for luxury cruises is way down. Eugene doesn’t want the company’s current ratio to fall below the 1.0 minimum stated in its debt covenant with First Federal Bank. If the company reports a current ratio below 1.0 at year-end, First Federal may require immediate repayment of its $8 million loan, which is not due for another two years.At the end of the year, Caribbean Cruise Lines reports current assets of $10.1 million and current liabilities of $10 million. These amounts include advanced payments of $1 million from customers in December for cruises to be provided the following summer. Instead of treating the $1 million as deferred revenue, Eugene decided to count the cash received as revenue. He reasoned that cash has already been collected and the company has a long history of providing cruises, so…
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- A bank lends some money to a business. The business will pay the bank a single payment of $180,000 in ten years time. How much greater is the present value (PV) of this payment if the interest rate is 6% rather than 5%? A. $11,992 B. $7,995 C. $9,993 Your answer is correct. D. $13,991Last year, Lee Industries decided to restructure some of its debt by paying off one of its short-term loans. To do so, the company borrowed the money one year ago at an interest rate of 10% per year. If the total cost of repaying the loan was $53 million, what was the amount of the original loan?HoneySing is a commercial enterprise which markets materials of construction to building contractors. It gives a 1 month credit facility to its customers, and it is not its commercial practice to charge interest on overdue debts. It has a floating rate loan with Hulu bank at a variable interest rate which is currently 6% per year. The previous year’s rate was 4%. The company is expecting the rate of interest to increase further in the near future. Required: Comment on the interest rate risk faced by HoneySing and the repercussions an adverse movement will have on the company.
