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Tierney Enterprises is constructing its cash budget. Its budgeted monthly sales are $5,000, and they are constant from month to month. 40% of its customers pay in the first month and take the 2% discount, while the remaining 60% pay in the month following the sale and do not receive a discount. The firm has no bad debts. Purchases for next month's sales are constant at 50% of projected sales for the next month. "Other payments," which include wages, rent, and taxes, are 25% of sales for the current month. Construct a cash budget for a typical month and calculate the average net cash flow during the month?.
Firm R currently has $1,000,000 of debt outstanding with a before tax annual coupon of 5%, a constant EBIT of $2,100,000 and 500,000 shares outstanding at a market price of $20.00. What is the estimated value of the firm after the new debt issue? Wha..
Jiminy Cricket Removal has a profit margin of 9 percent, total asset turnover of 1.07, and ROE of 14.39 percent. What is this firm’s debt-equity ratio?
Foster Company calculation risk premium on its Common stock. What is the risk premium on common stock? Current price per share of common $50.00 Expected Dividend per share next year $3.00 Constant annual dividend growth rate 9% Risk-free rate of retu..
The Miller-Modigliani model proposes that debt is irrelevant. Under what conditions is this true? If debt is irrelevant, what is the effect of changing the debt ratio on the cost of capital?
To pay for her college education, Gina is saving $2,000 at the beginning of each year for the next eight years in a bank account paying 12 percent interest. How much will Gina have in that account at the end of 8th year?
Explain what “capital adequacy” means. Then explain how it has been used to try and address risk management of banks. Finally, as an opinion, relate if you think this has been helpful through the Basel Accords.
You just graduated and you plan to work for 10 years and then leave for the Australian outback bush country. You figure you can save $1500 a year for the first 5 years and $2000 a year for the next 5 years. These savings cash flow will start one year..
A bond sells for $921.10 and has a coupon rate of 7.40 percent. If the bond has 19 years until maturity, what is the yield to maturity of the bond?
A Korean bank’s balance sheet is the following. (Ignore other items.) If the company is afraidof depreciation of US dollar against KRW, what type of swap arrangement do you suggestwhen US interest rate is expected to be stable? What is the amount of ..
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent, and the company just paid a di..
How does a hedge fund differ from a traditional mutual fund? - What are the two types of hedge funds and how are their requirements for participation different?
A company recently announced that it will pay its first annual dividend one year from today in the amount of $0.45 per share. The dividend is expected to increase thereafter by 4% annually. How much are you willing to pay today for one share of this ..
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