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
Measuring the Behaviour of Stock in the Estimation Window and the Event Window As its name implies, the estimation window is used to estimate a model of the stock's returns un

1)   Select an organization that you are familiar with and evaluate the steps needed to  transform  the business plans into Balance Score Cards & Key Performance Indicators 2)

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

You are a ceo of a sotware firm that has limited access to debt equity markets. The average return on last year projects is 28 % . and cost of capital is 12%. would npv pr Irr be

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

I have been given 3 different types of projects. They state the IRR and how much the project will add. The question goes on to give a WACC with break points. The question wants

Question: In view of its international operations management, Remo Ltd which is based in USA expects to make a payment of £ 50,000 to a UK supplier for raw materials in six mon

Seattle Health Plans currently uses zero debt financing.  Its operating income (EBIT) $1 million, and it pays taxes at a 40 percent rate.  It has $5 million in assests and because

Question: (a) Describe the essential characteristics of money. (b) Keynes identified three motives for holding balances of money. (i) What are these three motives?

Ask question #Minimum 100 words aapplicability of allocation function of fiscal policy#