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
1. Use the bond price, yield-to-maturity, and quantity available you collected for each bond in Component 2 for this project to estimate an average current bond price and an averag

Question 1: (a) Show the forces driving cross-border mergers that operate more strongly than the reasons for transactions that take place within a given country's border. (b

Question 1: Participants in a recent radio discussion on the WTO were full of ideas. The WTO could do this, the WTO should do that, they said. One of them finally interjected:

In this section, we will compare the ?ve forecasting methods using the case study data described in Section 4. Methods 1-3 will ?rst be compared for the full data set (assortment g

Assignment Describe in detail one method for improving the accuracy of option prices and the first two 'Greeks', Delta and Gamma, calculated using the binomial tree. You should giv

i need a assignment on uk company to be submitted in my college how can u help

Question: (a) Describe why the discount rate equals opportunity cost of capital? (b) "Nominal rate less inflation rate is equal to real rate of return" - Is it true? Why or

created the firm''s pro forma balance sheet for the next fiscal year?

Ask question #A machine has a cost of $180. It will have a life of 3 years, and will be depreciated straight line to zero salvage value. It will result in sales revenue of $200 per

Some aggregate figures concerning the available data are shown in Table 1. The sizes of both the assortment groups and the product groups vary greatly across the groups. In Season