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Bernie’s Bike Shop receives the following trade discounts: 35/25/15. The vendor’s price list indicates that 35 percent off list price is for purchasing bikes in quantities of 100 or more, 25 percent off list price is for assembling the bikes for customers, and 15 percent is for sales promotion and local advertising. a. If the manufacturer’s list price is $470, what should Bernie pay for each bike if he orders 110 bikes at a time, assembles the bikes, and displays and advertises them? b. What is Bernie’s single equivalent discount rate? c. How much will Bernie pay the manufacturer for each bike if he orders ten bikes at a time and takes advantage of the other discounts?
In exercise 13, Bernie is given terms of 4/15 n/30, and he pays by day 15.
a. How much will he pay the manufacturer for the order of 110 bikes?
b. For how much will the manufacturer credit Bernie’s account?
c. If Bernie has a cash flow problem and waits until day 30 to pay the manufacturer, what is his effective rate of financing for the year?
Find the WACC for a firm with the following characteristics. A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.5% and a value of $3,500,000. The firm plans on keepin..
A company pays a current dividend of $1.20 per share of common stock. The annual dividend will increase by 3%, 4% and 5%, respectively, over the next three years, and by 6% per year thereafter. The appropriate discount rate is 12%. What is the price ..
A company's 8% coupon rate, semi-annual payment, $1,000 par value bond that matures in 25 years sells at a price of $558.92. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calcula..
Tom sold 100 cases of tomato soup to Louie for $1,500. Louie gave Tom a promissory note, which stated "I promise to pay to the order of Tom the sum of $1,500 three months from date, together with 5% interest." When Sally presents the note to Louie fo..
Southwest Ventures is considering an investment in an Austin, Texas–based startup firm called Creed and Company. Creed and Company is involved in organic gardening and has developed a complete line of organic products for sale to the public that rang..
Suppose that you buy a stock index futures contract at the opening price of 452.25 on July 1.- Construct a table showing the charges and credits to the margin account.
The purpose of the weighted average cost of capital (WACC) is to discount the cash flows from:
Rosita's is considering a project that has been assigned a discount rate of 12 percent. If the firm starts the project today, it will incur an initial cost of $38,260 and will receive cash inflows of $18,320 a year for three years. If the firm waits ..
You will be paying $10,000 a year in education expenses at the end of the next two years. Currently the yield curve is flat at 8%. If you want to fully fund and immunize your obligation with a single issue of a zero-coupon bond, what maturity bond mu..
Stock in Daenerys Industries has a beta of 1.1. The market risk premium is 7 percent, and T-bills are currently yielding 5 percent. The company’s most recent dividend was $1.40 per share, and dividends are expected to grow at an annual rate of 7 perc..
Compute the expected return given these three economic states, their likelihoods, and the potential returns: (Round your answer to 2 decimal places.) Economic State Probability Return Fast growth 0.24 33 % Slow growth 0.52 7 Recession 0.24 –40.
Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other..
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