Assignment, Corporate Finance

5. Produce a cash budget and determine the statement of external financing required for NSP Inc. for the months of December and January using the following information:
• NSP Inc. had sales in prior months as follows: August $150M, September $250M, October $300M, November $200M
o Due to the Holiday shopping season, it is anticipated that sales in December will increase by 100% month-over-month and in January they will decline by 75% month-over-month.
• The firm has two main types of customers:
o Retail customers are offered 30 day terms. They typically pay as follows: 25% pay in cash, 50% pay in one month, 15% pay in two months, 7% pay in three months, and the remainder is written off as bad debt.
o Commercial customers are offered 90 day terms. They typically pay as follows: 5% in cash, 5% in one month, 5% in two months, 70% in three months, 14% in four months, and the remainder is written off as bad debt.
o On average, the firm’s sales are made up of 35% retail customers and 65% commercial customers.
• The firm owns shares in ABC Inc. and bonds of XYZ Inc. The shares will pay a dividend of $50M in January and the bonds will make an interest payment of $20M in December.
• The firm’s COGS is 80% of sales. Suppliers typically offer the firm 30 day terms, and the firm typically pays as follows: 10% in cash, 85% in one month, and the remainder in two months.
• The firm’s fixed expenses, excluding salaries, are $20M a month.
• Salaries are largely variable, with gross salaries equaling 2% of monthly sales plus a fixed component of $1M. Salaries are paid a month in arrears (that is, with a month’s delay).
• The firm has debt outstanding. The debt has a total face value of $100M and is currently priced at $955 per bond. The debt has quarterly interest payments, a coupon rate of 8% and a yield to maturity of 6%. The next interest payment is due in January.

• The firm also plans to issue new shares in December. The shares are currently trading at $25M in the marketplace and the firm has 15M shares currently outstanding. They will increase the number of shares outstanding by 10% with the December issuance.
• The firm currently has a cash balance of $50M. It wishes to increase this balance to $75M in December and to maintain this as a minimum cash cushion in the future. If the firm has cash in excess of this amount, it will use it to pay down its line of credit.
6. Pavilion Inc. uses 20,000 units of inventory per year. Each order of inventory costs the firm $250 and the carrying cost associated with the inventory is $1.25 per unit.
i. What is the total inventory cost if the firm only purchases inventory once per year? [3 points]
ii. What is the total inventory cost if the firm purchases inventory every week? [3 points]
iii. What is the economic order quantity? [5 points]

7. You are considering purchasing a new computer for $2,000. You have done some research and have found four potential stores to purchase your computer from. Each offers you different payment terms, as outlined below. Where discount offers you the lowest effective annual interest rate?
i. Futureshop: 1.5/10 net 20 [3 points]
ii. Staples: 2/15 net 20 [3 points]
iii. Costco: 1.5/10 net 30 [3 points]
iv. Walmart: 2.5/5 net 45 [3 points]
Posted Date: 11/27/2012 1:49:40 AM | Location : Canada

Related Discussions:- Assignment, Assignment Help, Ask Question on Assignment, Get Answer, Expert's Help, Assignment Discussions

Write discussion on Assignment
Your posts are moderated
Related Questions
Ask question #Minimum 100 words acceptedPlease describe what you see as the financial reporting failures in the last four years time period#

A minimum level of sales-oriented activities that must be meet up by a salesperson in the given time period. An activity quota may need a salesperson to create a certain number of

#quThree years ago the U. S. dollar equivalent of a foreign currency was $ 1.2167. Today, the U. S. dollar equivalent of a foreign currency is $ 1.3310. Determine the percentage ch

Two years ago, Homeless People Ltd needed to accumulate a total of $600,000 by the end of four years to acquire new facility to house the homeless people in the city.  To do so, Ho

Question 1 If the economy booms, RTF, Inc. stock is expected to return 10%. If the economy goes into a recessionary period, then RTF is expected to only return 4%. The probability

L has business assets worth $8 million and NOL carryovers of $1 million expiring in 14 years and of $2 million expiring in 15 years. 100% of L's stock is worth $10 million. The l

Problem: (a) The Automated Clearing House (ACH) is an electronic payment network used by individuals, businesses, financial institutions and government organisations. (i) Ou

Problem 1 What is a bill of exchange? Explain carefully the requisites for a bill of exchange to be valid.  Problem 2 You have a close friend, Peter, who is a renowned

Question: (a) With the help of illustrative and numerical examples differentiate fully speculation and arbitraging in the context of foreign exchange. (b) Shirley, a trade