Corporate Finance (The Mcgraw-hill/Irwin Series in Finance Insurance and Real Estate)
11th Edition
ISBN: 9781259295881
Author: Ross
Publisher: MCG
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Question
Chapter 27, Problem 7QP
a.
Summary Introduction
To compute: The present value of adopting the system.
Purchasing power can be referred to the amount of goods and services that can be purchased by one unit of money. It decreases with an increase in inflation or decreases with the decrease in inflation.
b.
Summary Introduction
To compute: The
c.
Summary Introduction
To compute: The net cash flow from adopting.
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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.)
a. What net benefit (cost) will the firm realize if it adopts the lockbox system? Should it adopt the proposed lockbox system?
Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks. Sales are projected to increase by $200,000 per year if credit is extended to these new customers. Of the new accounts receivable generated, 7% are projected to be uncollectible. Additional collection costs are projected to be 3% of incremental sales (whether they actually end up collected or not), and production and selling costs are projected to be 80% of sales. Your firm expects to pay a total of 40% of its income after expenses in taxes.
1.Compute the incremental income after taxes that would result from these projections:
2.Compute the incremental Return on Sales if these new credit customers are accepted:
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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.
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…
Chapter 27 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance Insurance and Real Estate)
Ch. 27 - Cash Management Is it possible for a firm to have...Ch. 27 - Cash Management What options are available to a...Ch. 27 - Prob. 3CQCh. 27 - Cash Management versus Liquidity Management What...Ch. 27 - Prob. 5CQCh. 27 - Collection and Disbursement Floats Which would a...Ch. 27 - Prob. 7CQCh. 27 - Short-Term Investments For each of the short-term...Ch. 27 - Prob. 9CQCh. 27 - Prob. 10CQ
Ch. 27 - Prob. 11CQCh. 27 - Prob. 12CQCh. 27 - Calculating Float In a typical month, the Warren...Ch. 27 - Calculating Net Float Each business day, on...Ch. 27 - Costs of Float Purple Feet Wine, Inc., receives an...Ch. 27 - Float and Weighted Average Delay Your neighbor...Ch. 27 - Prob. 5QPCh. 27 - Using Weighted Average Delay A mail-order firm...Ch. 27 - Prob. 7QPCh. 27 - Lockboxes and Collections It takes Cookie Cutter...Ch. 27 - Value of Delay No More Pencils, Inc., disburses...Ch. 27 - NPV and Reducing Float No More Books Corporation...Ch. 27 - Prob. 11QPCh. 27 - Prob. 12QPCh. 27 - Prob. 1MCCh. 27 - Prob. 2MCCh. 27 - What cost of ACH transfers would make the company...
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