Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 8, Problem 21P
Mr. Hugh Warner is a very cautious businessman. His supplier offers trade credit terms of 3/15, net 85. Mr. Warner never takes the discount offered, but he pays his suppliers in 75 days rather than the 85 days allowed so he is sure the payments are never late. What is Mr. Warner’s cost of not taking the cash discount?
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John spends $600 using a new credit card. The credit card has a limit of $1,000 with a $35 late fee, a $35 over-limit fee, a 0% introductory APR for 12 months, and a 19.9% APR on purchases after the introductory period. If John does not use the card to purchase anything else, how much must he pay every month during the first year to avoid any fees? If he ends up with a balance of $30 after the first year, what charges will apply?
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Your FICO score makes a big difference in how lenders determine what interest rate to charge you. Consider the situation faced by Edward and Jorge. Edward has a fairly poor FICO score of 660 and, as a result, pays 18.0% APR on the unpaid balance of his credit card. Jorge has a FICO score of 740 and pays only 7.3% APR on the unpaid balance of his credit card. If both persons carry an average balance of $3,000 on their credit cards for three years, how much more money will Edward repay compared with what Jorge owes (moral: you want a high FICO score)? Assume monthly compounding of interest.
Assume that Edward and Jorge makes constant monthly payment for the next 36 month to pay it off. What will be the monthly payment amount for each? Also, in simple calculation (without regard to compounding,) how much will Edward will pay more than Jorge? For example, if A pays $500/mo for a year and B pays $400/mo for a year, A would be paying $1200 more in simple calculation.
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RM Company, owner of RM Mall, charges Hope Clothing Store, a rental fee of P60, 000 per month plus 5% yearly profits over P5, 000,000. Jacob, the owner of the store, directs his accountant Jun Reyes, to increase the estimate of bad debt expense and warranty costs in order to keep profits at P4, 750,000. Instructions:Should Jun Reyes follow his boss’ directive? Who is harmed if the estimates are increased?
Chapter 8 Solutions
Foundations of Financial Management
Ch. 8 - Under what circumstances would it be advisable to...Ch. 8 - Discuss the relative use of credit between large...Ch. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Compute the cost of not taking the following cash...Ch. 8 - Regis Clothiers can borrow from its bank at 17...Ch. 8 - Simmons Corp. can borrow from its bank at 17...Ch. 8 - Your bank will lend you $4,000 for 45 days at a...Ch. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Mary Ott is going to borrow $10,400 for 120 days...Ch. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - McGriff Dog Food Company normally takes 27 days to...Ch. 8 - Maxim Air Filters Inc. plans to borrow $300,000...Ch. 8 - Digital Access Inc. needs $400,000 in funds for a...Ch. 8 - Carey Company is borrowing $200,000 for one year...Ch. 8 - Randall Corporation plans to borrow $233,000 for...Ch. 8 - Prob. 16PCh. 8 - Your company plans to borrow $13 million for 12...Ch. 8 - If you borrow $5,300 at $400 interest for one...Ch. 8 - Zerox Copying Company plans to borrow $172,000 ....Ch. 8 - Prob. 20PCh. 8 - Mr. Hugh Warner is a very cautious businessman....Ch. 8 - The Reynolds Corporation buys from its suppliers...Ch. 8 - Prob. 23PCh. 8 - Neveready Flashlights Inc. needs $340,000 to take...Ch. 8 - Harper Engine Company needs $631,000 to take a...Ch. 8 - Summit Record Company is negotiating with two...Ch. 8 - Charming Paper Company sells to the 12 accounts...Ch. 8 - The treasurer for Pittsburgh Iron Works wishes to...
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