Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 29, Problem 4PS
Sources and uses of cash State whether each of the following events is a source or use of cash, or neither.
- a. An automobile manufacturer increases production in response to a
forecasted increase in demand. Unfortunately, the demand does not increase. - b. Competition forces the firm to give customers more time to pay for their purchases.
- c. Rising commodity prices increase the value of raw material inventories by 20%.
- d. The firm sell s a parcel of land for $100,000. The land was purchased five years earlier for $200,000.
- e. The firm repurchases its own common stock.
- f. The firm doubles its quarterly dividend.
- g. The firm issues $1 million of long-term debt and uses the proceeds to repay a short-term bank loan.
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Your consulting firm was recently
hired to improve the performance of
RP Inc, which is highly profitable but
has been experiencing cash
shortages due to its high growth
rate. As one part of your analysis.
you want to determine the firm's
cash conversion cycle. Using the
following information and a 365-day
year, what is the firm's present cash
conversion cycle?
Average inventory
Annual sales
Annual cost of goods seld
Average accounts receivable
Average accunts payable
P5.000
P00.000
PH0,000
P0,000
F5000
140.6 days
120.6 days
133.6 days
148.0 days
O 126.9 days
Please answer all the questions i have mentioned below : -
Read the section on the Cash Conversion Cycle (or “Cash Cycle”) and use your own words to answer the questions:
Explain cash conversion cycle and why it is important to companies?
Is it possible that a company has a negative cash cycle? Is it a good thing or a bad thing?
2. A company has days of inventory 80 days, days receivable of 30 days, and days payable of 90 days. Calculate the company’s funding gap.
3. Use your own words to explain the following:
Weighted Average Cost of Capital (WACC): formula and what it measures
Cost of Debt: formula and what it measures
Capital Asset Pricing Model (CAPM): formula and what it measures
The calculation for assessing the value of a firm's new logistics information system is below. Which of the answers will result in the highest cash flow increase to the company, making it worth the investment.
Cash Flow Increase = Invoice Value x (Cost of Capital/365) x Difference in Days in the Order-to-Cash Cycle
Group of answer choices
If the investment causes a dramatic increasing in the order to cash cycle days
If the investment causes a dramatic decreasing the order to cash cycle days
If the firm borrows money to make the investment (debt financing) at a very low cost
If the investment allows sales to remain stable
Chapter 29 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 29 - Prob. 1PSCh. 29 - Prob. 2PSCh. 29 - Sources and uses of cash and working capital...Ch. 29 - Sources and uses of cash State whether each of the...Ch. 29 - Prob. 5PSCh. 29 - Forecasts of payables Dynamic Futon forecasts the...Ch. 29 - Prob. 8PSCh. 29 - Prob. 9PSCh. 29 - Prob. 10PSCh. 29 - Prob. 11PS
Ch. 29 - Cash cycle A firm is considering several policy...Ch. 29 - Prob. 13PSCh. 29 - Collections on receivables If a firm pays its...Ch. 29 - Short-term financial plans Which items in Table...Ch. 29 - Prob. 16PSCh. 29 - Short-term financial plans Work out a short-term...Ch. 29 - Prob. 18PSCh. 29 - Prob. 19PSCh. 29 - Long-term financial plans Corporate financial...Ch. 29 - Prob. 21PSCh. 29 - Long-term financial plans a. Use the Dynamic...Ch. 29 - Long-term plans The financial statements of Eagle...Ch. 29 - Forecast growth rate a. What is the internal...Ch. 29 - Forecast growth rate Bio-Plasma Corp. is growing...Ch. 29 - Long-term plans Table 29.19 shows the 2016...
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