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ABC company is considering factoring its receivable. The firm has credit sales of $600,000 per month and an average receivable balance of $ 600,000 with net 90 credit terms. The 10% difference in the advance and the face value of all receivables factored consists of a 0.5% factoring fee plus a 9.5% reserve. The factor will advance a loan which equals 85% of the receivables factored less interest on the loan at 1.5% per month. Under the factoring arrangement, evaluate the cost of borrowing the maximum amount of credit available to ABC company? (Calculate the APR and EAR and make any necessary assumption)
A company just paid a $2 per share dividend on its common stock (D0=$2.00). the dividend is expected to grow at a constant rate of 7 percent per year. the stock currently sells for $42 a share. if the company issues additional stock, it must pay its ..
Identify whether you should use an average cost of bank funds or a marginal cost of funds in the following situations. a. Setting the rate on a new loan b. Evaluating the profitability of a long standing customer's relationship c. Calculating the ban..
Phil's Corp. (PC) reported AT Earnings of $15,000,000. PC has 2,150,000 shares outstanding and has excess cash on hand of $5,500,000. PC stock is currently trading at $62 a share. PC's EPS after any share repurchase would be:
Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2011? Rank from highest to lowest.
Assume that you contribute $280 per month to a retirement plan for 25 years. Then you are able to increase the contribution to $560 per month for another 25 years. Given a 8 percent interest rate, what is the value of your retirement plan after the 5..
What is the market value of a bond that will pay a total of fifty semiannual coupons of $80 each over the remainder of its life? Assume the bond has a $1,000 face value and a 12% yield to maturity (note: this is an APR).
Capital Co. has a capital structure, based on current market values, that consists of 21 percent debt, 17 percent preferred stock, and 62 percent common stock. If the returns required by investors are 11 percent, 11 percent, and 18 percent for the de..
Fun Land is considering adding a miniature golf course to its facility. The course would cost $64000, would be depreciated on a straight line basis over its 4 year life, and would have a zero salvage value. The estimated income from the golfing fees ..
Consider a 15-year, $155,000 mortgage with a rate of .0595 percent. Eight years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate for..
River Cruises is allequityfinanced with 100,000 shares. It now proposes to issue $250,000 of debt at an interest rate of 10% and to use the proceeds to repurchase 25,000 shares. Suppose that the corporate tax rate is 35%. Calculate the dollar incre..
A piece of airport baggage handling equipment can be purchased for $60,000 cash or for $65,000 to be financed over 50 months at 0% interest. This special offer is good for only the next two days. The salesperson states that at least $14,000 can be sa..
A share of stock with a beta of .72 now sells for $58. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 3%, and the market risk premium is 6%. At what price will the stock reach an "equilibrium" at which it is perceived..
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