Advanced Financial Management (Custom Package)
17th Edition
ISBN: 9781323539439
Author: LOYOLA UNIV.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.15P
a.
Summary Introduction
To determine: The amount of cash will be made available for other uses under the lockbox system.
b.
Summary Introduction
To determine: The net benefit (cost) will the firm realize if it adopts the lockbox system and should it adopt the proposed lockbox system
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
[EXCEL] Payback: Nakamichi Bancorp has made an investment in banking software at a cost of $1,875,000. Management expects productivity gains and cost savings over the next several years. If, as a result of this investment, the firm is expected to generate additional cash flows of $586,212, $713,277, $431,199, and $318,697 over the next four years, what is the investment's payback period?
Answer the given problems. Use 360 days in a year.
Problem A: Baumol ModelABC Corporation would like to know what is its optimal cash balance for a disbursement account. The daily averagedisbursement is P40,000. Cost to transfer money into the account average P500 each time. If the money is not in this account,it could have been kept in a mutual fund account that would let ABC earn 3% per year.Required:1. Optimum cash balance2. Total cost of holding and maintaining the optimal cash balance
Bulldogs Inc. maintains a cash buffer for unexpected cash outlays for the year amounting to 3,000. Bank of Wildcats charges Bulldogs P15 for every transaction with the bank. The bank grants 5% annual interest. Bulldogs is contemplation if it will still need to have the cash buffer. How much is the annual savings in annual holding cost of cash for Bulldogs if it will not have a cash buffer?
It is assumed that the Cost of equity and rate of return are both constant under Walter’s Model of Dividend Relevance, if the cost of equity is higher than the rate of return, it is optimal that
The firm is indifferent as to distribute dividends or to reinvest the income
None of the choices is correct.
No dividend to be given to shareholders
All the earnings for the period shall be distributed to shareholders
Chapter 15 Solutions
Advanced Financial Management (Custom Package)
Ch. 15.1 - Why is working capital management one of the most...Ch. 15.1 - Prob. 15.2RQCh. 15.1 - Prob. 15.3RQCh. 15.2 - Prob. 15.4RQCh. 15.2 - Prob. 15.5RQCh. 15.2 - What are the benefits, costs, and risks of an...Ch. 15.2 - Prob. 15.7RQCh. 15.3 - Prob. 1FOPCh. 15.3 - Prob. 15.8RQCh. 15.3 - Briefly describe the following techniques for...
Ch. 15.3 - Prob. 15.10RQCh. 15.4 - Prob. 15.11RQCh. 15.4 - Prob. 15.12RQCh. 15.4 - What are the basic tradeoffs in a tightening of...Ch. 15.4 - Prob. 15.14RQCh. 15.4 - Prob. 15.15RQCh. 15.4 - Prob. 15.16RQCh. 15.5 - Prob. 1FOECh. 15.5 - Prob. 15.17RQCh. 15.5 - What are the firms objectives with regard to...Ch. 15.5 - Prob. 15.19RQCh. 15.5 - Prob. 15.20RQCh. 15.5 - Prob. 15.21RQCh. 15 - Prob. 1ORCh. 15 - EOQ analysis Thompson Paint Company uses 60,000...Ch. 15 - Learning Goal 4 ST15- 3 Relaxing credit standards...Ch. 15 - Prob. 15.1WUECh. 15 - Learning Goal 2 E15-2 Icy Treats Inc. is a...Ch. 15 - Prob. 15.3WUECh. 15 - Forrester Fashions has annual credit sales of...Ch. 15 - Prob. 15.1PCh. 15 - Learning Goal 2 P15-2 Changing cash conversion...Ch. 15 - Prob. 15.5PCh. 15 - EOQ, reorder point, and safety stock Alexis...Ch. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Relaxation of credit standards Lewis Enterprises...Ch. 15 - Initiating an early payment discount Gardner...Ch. 15 - Prob. 15.12PCh. 15 - Lengthening the credit period Parker Tool is...Ch. 15 - Prob. 15.14PCh. 15 - Prob. 15.15PCh. 15 - Prob. 15.16PCh. 15 - Prob. 15.18P
Knowledge Booster
Similar questions
- Course: Financial MathematicsA capitalist places a sum of $12,500 at 4% per annum and 3.5 months later, another sum of $28,500 at 4.75%. After how much time will two (2) sums placed have yielded equal interest, and how much would first sum have yielded at twice the time, and how much would first sum placed at twice the time and with a discount of 0.5% in rate have yielded? Answers: 5.6 months of time and $408.33 yields the first sum. Please procedures are needed to get answer by professor THANKS :Darrow_forwardPart 1 You have P10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years? An account that compounds interest. please explain 1.1 Annually 1.2 Daily 1.3 Quarterly 1.4 Monthly 2. The company is setting aside funds to acquire a property for its new warehouse. The company needs P74,735 to make the down payment. The company deposits P5,000/month in the fund account which pays 1% per month. As the financial manager you have been tasked to determine how long it will take to accumulate enough funds to acquire the property? 3. Suppose you are 40 years old and plans to retire in exactly 20 years. Twenty one years from now you will need to withdraw P50,000 per year from your retirement fund to add to your SSS pension. Assume you are to live for 85 years, how much money should you place in the retirement fund each year for the next 20…arrow_forwardD3) Finance Calculate the loan risk associated with a $4 million, five-year loan to a BBB-rated corporation in the computer parts industry that has a duration of 5.8 years. The cost of funds for the bank is 8 per cent. Based on four years of historical data, the bank has estimated the maximum change in the risk premium on the computer parts industry to be approximately 4.0 per cent. The current market rate for loans in this industry is 11 per cent.arrow_forward
- SUBJECT: ENGINEERING ECONOMICS INSTRUCTION: Answer the following questions by including the appropriate cash flow diagrams, solution, and final answer. 1. You are planning to save enough money to buy a brand new car five years from now. You are setting a budget of Php 1,000,000 for this purchase. Your plan is to accumulate the amount by making three savings deposits at an interest rate of 10%. Deposit 1: Deposit Php 100,000 today, Deposit 2: Deposit Php 150,000 two years from now, Deposit 3: Deposit an amount Php X three years from now. How much do you need to invest in year three to ensure that you have the necessary fund to buy the new car at the end of year five?arrow_forwardProblem 1 The management of Campaign for Peace in Nepal Limited decided to buy a printing press by taking a loan of Rs 1,500,000 for 4 years from Peace Cooperative Limited. The loan bears a compound annual interest rate of 12 percent and calls for equal annual installment payments at the end of each year for 4 years. a.What is the amount of annual payments? b.Prepare a schedule showing the fraction of interest and principal payment for each year. c.What fraction of payment made in year 2 represents the principal? d.What fraction of payment made in year 4 represents the interest?arrow_forwardPROBLEM The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 4. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the total costs per month associated its cash infusions? Use a number, no decimal value no currency, no space, no commas * 5. If Sandbox gets a cash infusion of P1 million each time it needs cash, how many transactions would be associated with its cash investment? Use a number, no decimal value no currency, no space, no commas * 6. Using the Baumol model, what level of cash infusion minimizes Sandbox’s costs associated with cash? Use a number, no decimal value no currency, no space, no commas. * 7. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the transactions costs per…arrow_forward
- Problem The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. If Sandbox gets a cash infusion of P1 million each time it needs cash, how many transactions would be associated with its cash investment? Use a number, no decimal value no currency, no space, no commas * 2. Using the Baumol model, how much would be the Sandbox’s minimum total costs associated with cash infusion? Use a number, no decimal value no currency, no space, no commas. * THIS IS NOT A BARTLEBY ESSAY QUESTIONS. IT INVOLVES COMPUTATIONS, NOT ESSAYS! READ IT AGAIN! DO NOT ASK THIS TO BE REVISED!!!! please answer all questions. Thanks!arrow_forwardProblem The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the transactions costs per month associated its cash infusions? Use a number, no decimal value no currency, no space, no commas * PLEASE ANSWER THANKS!arrow_forwardP15–13 LOCKBOX SYSTEM Eagle Industries believes that a lockbox system can shorten its accounts receivable collection period by 3 days. Credit sales are $3,240,000 per year, billed on a continuous basis. The firm has other equally risky investments that earn a return of 15%. The cost of the lockbox system is $9,000 per year. (Note: Assume a 365-day year.) What amount of cash will be made available for other uses under the lockbox system? What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system?arrow_forward
- Draw the necessary cash flow diagrams. Prob#2: A man receives a P 250,000.00 credit for his old car when buying a new model costing P 750, 000.00. What remaining initial cash payment is necessary if equal payments of P 15, 000.00 at the end of each month for 20 months is charged at the rate of 7% compounded monthly? If he decided to add another P 100,000.00 after crediting the price of his old car, what equal payments for 15 months is necessary in order for the balance to be repaid at 6% compounded monthly?arrow_forward[EXCEL] Investment cash flows: Keswick Supply Company wants to set up a division that provides copy and fax services to businesses. Customers will be given 20 days to pay for such services. The annual revenue of the division is estimated to be $25,000. Assuming that the customers take the full 20 days to pay, what is the incremental cash flow associated with accounts receivable? Please use excel.arrow_forwardPROBLEM Buccaneer, Inc., has determined that it needs $10 million in cash per week. If Buccaneer needs additional cash, it can sell marketable securities, incurring a fee of $100 for each transaction. If Buccaneer leaves funds in its marketable securities, it expects to earn approximately 0.2% per week on their investment. 1. How much is the weekly opportunity cost of cash? (Use a number, must be in decimal form. eg. 6.3%/100, encode 0.063 , no commas, no currency, no space) * 2. How much is the total demand for cash per week? (Use a number, no decimal value, no commas, no currency, no space) * 3. How much is the cost per transaction? (Use a number, no decimal value, no commas, no currency, no space) * 4. Using the Baumol Model, how much cash should Buccaneer raise from selling securities each week to minimize its costs of cash? (Use a number, no decimal value, no commas, no currency, no space) * PLEASE ANSWER ALL QUESTIONS. THANK YOUarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education