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1. Community Hospital has annual net patient revenues of $150 million. At the present time, payments received by the hospital are not deposited for six days on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to one day. If these funds released by the lockbox arrangement can be invested at 8 percent, what will the annual savings be? Assume the bank fee will be $2,000 per month.
2. St. Luke’s Convalescent Center has $200,000 in surplus funds that it wishes to invest in marketable securities. If transaction costs to buy and sell the securities are $2,200 and the securities will be held for three months, what required annual yield must be earned before the investment makes economic sense?
3. Your firm is considering the following three alternative bank loans for $1,000,000:
a) 10 percent loan paid at year end with no compensating balanceb) 9 percent loan paid at year end with a 20 percent compensating balancec) 6 percent loan that is discounted with a 20 percent compensating balance requirementAssume that you would normally not carry any bank balance that would meet the 20 percent compensating balance requirement. What is the rate of annual interest on each loan?4. An important source of temporary cash is trade credit, which does not actually bring in cash, but instead slows its outflow. Vendors often provide discounts for early payment. What is the formula to determine the effective interest rate if the discount is not utilized?
The required return on this stock is 10 percent, and the stock currently sells for $98 per share. What is the projected dividend for the coming year?
mmk cos. normally pays an annual dividend. the last such dividend paid was 2.2 all future dividends are expect to grow
How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.
The following questions are designed to test your ability to apply the concepts and techniques covered in the course. Answer them as fully as possible, identifying each by number. Each answer should be 3-4 pages in length.
The bonds make semiannual payments. What must the coupon rate be on these bonds?
Each bond originally sold at its $1,000 par value. What was the yield to maturity of these bonds when they were issued?
What is the break-even level of earnings before interest and taxes between these two capital structure options?
A firm has a debt ratio of 45%, capital intensity ratio is 1.3 times, profit margin is 10%, and dividend payout ratio is 30%. Calculate the sustainable growth rate for the firm.
On January 1, 2009, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 7.0%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest ta..
A company's perpetual preferred stockcurrently trades at $80 per share and pays a $6.00 annual dividendper share. If the company were to sell a new preferred issue,it would incur a flotation cost of 4%. What would the cost of that capital be?
resourcenbsp financial statements for the company assigned by your instructor in week 2.review the assigned companys
Creekside paid $30 million in dividends on preferred stock, which was convertible into 15 million shares of common stock. How much is basic earnings per share amount for 2011?
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