Fundamentals of Corporate Finance Standard Edition with Connect Plus
10th Edition
ISBN: 9780077630706
Author: Stephen Ross
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 18, Problem 5CRCT
Operating and Cash Cycles [LO1] Is it possible for a firm’s cash cycle to be longer than its operating cycle? Explain why or why not.
Use the following information to answer Questions 6–10: Last month, BlueSky Airline announced that it would stretch out its bill payments to 45 days from 30 days. The reason given was that the company wanted to “control costs and optimize cash flow.” The increased payables period will be in effect for all of the company’s 4,000 suppliers.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
5. A. Anthony & Sons Concrete Company has been offered by its bank to manage its cash at a cost of $35,000 per year. Under the proposed cash management, the firm can reduce the cash required on hand by $180, 000, Since the bank is also doing a lot of record keeping, the firm's administrative cost would decrease by $2, 000 per month. What recommendation would you give the firm with respect to the proposed cash management assuming the firm's opportunity cost is 12 percent?
Calculating Flotation Costs [LO4] Suppose your company needs $24 million to build a new assembly line. Your target debt-equity ratio is .75. The flotation cost for new equity is 7 percent, but the flotation cost for debt is only 3 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small.a. What do you think about the rationale behind borrowing the entire amount?b. What is your company’s weighted average flotation cost, assuming all equity is raised externally?
Fast pls solve this question correctly in 5 min pls I will give u like for sure
Surbh
Assume the firm has a constant dividend payout ratio and a projected sales increase of 10 percent. All costs, assets, and current liabilities vary directly with sales. The firm is currently at full production. What is the external financing need? Currently, the firm’s sales =$5,700, net income is $520, total assets=8890, dividends=156, A/P =990, LTD= 3730, and common stock=2980, and retained earnings =1200. $146.00 $251.20 $379.60 $421.60 $550.30
Chapter 18 Solutions
Fundamentals of Corporate Finance Standard Edition with Connect Plus
Ch. 18.1 - What is the difference between net working capital...Ch. 18.1 - Prob. 18.1BCQCh. 18.1 - List five potential sources of cash.Ch. 18.1 - Prob. 18.1DCQCh. 18.2 - Prob. 18.2ACQCh. 18.2 - Prob. 18.2BCQCh. 18.2 - Prob. 18.2CCQCh. 18.3 - What keeps the real world from being an ideal one...Ch. 18.3 - What considerations determine the optimal size of...Ch. 18.3 - Prob. 18.3CCQ
Ch. 18.4 - Prob. 18.4ACQCh. 18.4 - Prob. 18.4BCQCh. 18.5 - Prob. 18.5ACQCh. 18.5 - Describe two types of secured loans.Ch. 18.6 - Prob. 18.6ACQCh. 18.6 - In Table 18.6, what would happen to Fun Toys...Ch. 18 - Prob. 18.1CTFCh. 18 - A firm has an operating cycle of 64 days and a...Ch. 18 - Prob. 18.4CTFCh. 18 - Prob. 18.5CTFCh. 18 - Operating Cycle [LO1] What are some of the...Ch. 18 - Prob. 2CRCTCh. 18 - Prob. 3CRCTCh. 18 - Cost of Current Assets [LO2] Loftis Manufacturing,...Ch. 18 - Operating and Cash Cycles [LO1] Is it possible for...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Prob. 8CRCTCh. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Changes in the Cash Account [LO4] Indicate the...Ch. 18 - Prob. 2QPCh. 18 - Changes in the Operating Cycle [LO1] Indicate the...Ch. 18 - Prob. 4QPCh. 18 - Prob. 5QPCh. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - Prob. 8QPCh. 18 - Prob. 9QPCh. 18 - Prob. 10QPCh. 18 - Prob. 11QPCh. 18 - 12. Sources and Uses [LO4] Below are the most...Ch. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - 15. Calculating the Cash Budget [LO3] Wildcat,...Ch. 18 - Prob. 16QPCh. 18 - Prob. 17QPCh. 18 - Prob. 18QPCh. 18 - Prob. 1MCh. 18 - Prob. 2MCh. 18 - Prob. 3M
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Question 14 General Electric expects a net income next year of $19.53 million, and a free cash flow of $22.47 million. The company has a marginal corporate tax rate of 35%. Suppose General Electric increases its leverage, such that the interest expense of the company rises by $2.6 million. How will net income change? Show your work. 2. For the same increase in interest expense in part (1), how will free cash flow change? Free cash flow will increase by $2.6 million. Free cash flow will increase by less than $2.6 million. Free cash flow will remain the same. Free cash flow will decrease by less than $2.6 million Free cash flow will decrease by $2.6 millionarrow_forwardQ2. The following data applies to a company. 1. The minimum cash balance is $8,000. 2. The variance of daily cash flows is 4,000,000, equivalent to a standard deviation of $2,000 per day. 3. The transaction cost for buying or selling securities is $50. The interest rate is 0.025 per cent per day. You are required to formulate a decision rule using the Miller-Orr model. 1. What is the optimal cash return point? 2. What is the upper cash limit?arrow_forwardQ1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. A) How many dollars of resources does Aztec have invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC? B). If Aztec could shorten its cash conversion cycle by reducing its inventory holding period by 5 days, what effect would it have on its total resource investment found in part A?arrow_forward
- Q1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. a) If Dean Muhammad Suppliers receive an invoice for purchases dated 12/12/2002 subject to credit terms of "2/10, net 30", what is the last possible day the discount can be taken? January 11 January 22 January 30 December 22arrow_forwardQ1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. A. How many dollars of resources does Aztec have invested in (1) inventory, (2) accounts receivable, (3) accounts payable, and (4) the total CCC?arrow_forwardQ1: Aztec Products wishes to evaluate its cash conversion cycle (CCC). Research by one of the firm’s financial analysts indicates that on average the firm holds items in inventory for 65 days, pays its suppliers 35 days after purchase, and collects its receivables after 55 days. The firm’s annual sales (all on credit) are about $2.1 billion, its cost of goods sold represent about 67 percent of sales, and purchases represent about 40 percent of cost of goods sold. Assume a 365-day year. a. What is Aztec Products’ operating cycle (OC) and cash conversion (CCC)?arrow_forward
- H3. The value of HILEV firm at the end of one year can be $50 m or $100 m with equal probability of 0.5. The firm has debt with a face value of $50 m that matures in one year. Assume that investors are risk-neutral and the risk free rate is zero. The CEO of the firm decides to substitute assets of the firm with more risky assets immediately, so that the value of the firm at the end of one year is either $30 m or $120 m with equal probability of 0.5. This asset substitution will lead to A. A gain of $10 million for stockholders and a loss of $10 million for bondholders B. A loss of $10 million for stockholders and a gain of $10 million for bondholders C. No gain or loss to debtholders or equity holders D. Both debtholders and equity holders will lose $10 million from the increased risk of the business Show proper step by step calculationarrow_forwardwhich one is correct please suggest? QUESTION 39 Getrag expects its sales to increase 20% next year from its current level of $4.7 million. Getrag has current assets of $660,000, net fixed assets of $1.5 million, and current liabilities of $462,000. All assets are expected to grow proportionately with sales. If Getrag has a net profit margin of 10%, what additional financing will be needed to support the increase in sales? Getrag does not pay dividends. a. $339,600 b. No financing needed, surplus of $224,400 c. No financing needed, surplus of $524,400 d. $283,200arrow_forwardCH5 #10 A company is considering two alternative marketing strategies for a new product. Introducing the product will require an outlay of $15,000. With a low price, the product will generate cash proceeds of $10,000 per year and will have a life of two years. With a high price, the product will generate cash proceeds of $18,000 but will have a life of only one year. The hurdle rate for this project is 0.05. Which marketing strategy should be accepted?arrow_forward
- 2. Does the company have enough cash and liquidity to survive an economic slowdown? Enhance the answer with a clear conclusion Ans. The financials of WeWork doesn't seem to be much profitable, we can assume that is because of the pandemic. In the year 2022, the revenue of the first quarter was $765 million which is an increase of 6-7% in a quarter. Net loss was $504 million. Because of the increase in interest rates, it is hard for WeWork to get more loans to finish off its debt and the investors are not much interested as they can interpret the future outcomes by looking at the current balances of the company. The revenue in the third quarter was $817 million which is an increase of 24% year-over-year. The company has $500 million in undrawn debt commitments from SoftBank and has said it expects to end 2022 with $300 million in cash, less than one-third of what it had at the end of 2021. Its debt contracts allow it to borrow another $500 million. As the cash and liquidity of WeWork…arrow_forwardQ1) A. The company manager targets to increase the current ratio in the year (2021) by 30% out of the previous year (2020), this requiring to increase the amount of the total current asset. To what level can the manager increase the total current asset to achieve this target (30%) at (2021)? (Suppose the other things are fixe) B. The manager put a plan to increase the Time interest Earns (TIE) in the (2021) by (17%) out of the previous year (2020) to increase sales. How much will this plan to add amount to the accounts receivable (Suppose the other things are fixe) Data of 2020 Total Asset Turnover 2.5 Times Net Fixed Asset 600 (OMR) Total Liabilities 500 (OMR) Sales 2000 (OMR) Quick Ratio 1.5 Times Accounts Receivable 150 ( OMR) Long-term Liabilities 200 (OMR)arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
The management of receivables Introduction - ACCA Financial Management (FM); Author: OpenTuition;https://www.youtube.com/watch?v=tLmePnbC3ZQ;License: Standard YouTube License, CC-BY