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Solve the following problem. Norma's Cat Food of Shell Knob ships cat food throughout the country. Norma has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one-half days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Iowa.
If the company has $5 million per day in collections and $3 million per day in disbursements, how many dollars will the cash management system free up? Justify your answers.
If the company can earn 8 percent per annum on freed-up funds, how much will the income be? Justify your answers.
If the annual cost of the new system is $800,000, should it be implemented? Explain why or why not.
Which of the following could be expected to result in a stock market price change?
Railway Cabooses just paid its annual dividend of $4.10 per share. The company has been reducing the dividends by 12.5 percent each year. How much are you willing to pay today to purchase stock in this company if your required rate of return is 14 pe..
A trader is willing to purchase 1,000 shares of XYZ stock for a purchase price of $28.00 per share. Another trader is willing to sell 1,500 shares of XYZ stock at a selling price of $28.25 per share. Considering the number of shares that the dealer c..
Stock A has a daily volatility of 1.2% and stock B has a daily volatility of 1.8%. The correlation between the two stock price returns is 0.2. What is the standard deviation of the return from A over 4 days?
You are managing a hedge fund. Today, you find that the stock of Microsoft is undervalued. So, you would want to buy Microsoft stocks. But you know that buying the stocks only will make you exposed to risk even if the stock is actually undervalued. H..
Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 70; and it currently pays after 5 days and takes discounts. Lamar plans to expand, which will require additional financing. Assume 365 days in year for your calculation..
A new project you are considering is expected to generate an operating cash flow of $45,620 and will initially free up to 22,000 in net working capital. purchases of fixed assets costing 68,800 will be required to start up the project. what is the to..
Consider a home mortgage where you borrow $200,000 with a 30-year fixed rate loan. Suppose the mortgage interest rate is 0.708333% per month. What is your monthly mortgage payment?
Has anybody worked on the "Continental Carriers, Inc." case study? If so, what's the best response to the following question? How should the acquisition of Midland Freight be financed, taking into account to cost of comparisons and other appropriate ..
Momsen Corp. is experiencing rapid growth. Dividends are expected to grow at 30% per year during the next 3 years, 20% the following year and then 6% a year indefinitely after that. The required return on this stock is 10%, and the stock currently se..
The Retarded Company’s dividends are declining at an annual rate of 6 percent. The company just paid a dividend of $4 per share. You require a 16 percent rate of return. How much will you pay for this stock? The last dividend on Riverhawk Corporation..
Daily Enterprises is contemplating the acquisition of some new equipment. The purchase price is $31,000. The equipment has a 4-year life. The company expects to sell the equipment at the end of year 4 for $7,000. What is the incremental annual cash f..
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