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Kevin’s Wholesale is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $350,000 if credit is extended to these new customers. Of the new accounts receivable generated, 15 % will be uncollectible. Additional collection costs are estimated to be 2% of sales. Production and selling costs are 70% of sales. The firm is in the 35% tax bracket. Compute the Incremental Income After Taxes if these new credit customers are accepted. (show work)
If you are evaluating mutually exclusive investments, it is possible that the net present value and the internal rate of return methods may not agree as to which of the investments is the most desirable. Explain fully two reasons why this might occur..
Which of the following would be considered a cash inflow in the financing activities section of the statement of cash flows?
Given that higher risk investments, such as small-company stocks, have outperformed other investments over time, why don't all investors choose to invest only in these high risk securities? Explain why the reward-to-risk ratio must be equal for all s..
Early in 2013, Maria bought shares of MBA Inc. at $27.85 per share. She received the following dividends per share (end of year). 2013 $1.50 2014 $2.00 2015 $2.50 Immediately after receiving the 2015 dividend, she sold the stock for $32.50 per share...
Data Inc. recently hired you as a consultant to evaluate its cost of capital. Using the following information, determine Data Inc’s cost of capital. ? New debt can be raised at a rate equal to the yield to maturity (YTM) on the company’s outstanding ..
A $1000 par value convertible bond has a conversion price of $50. It is currently selling for $1,120 despite the fact that the bond’s coupon rate and the market rate are equal. The common stock obtained upon conversion is selling for $54 per share. W..
Bankrate.com reported on a shocking statistic: only 55% of workers participate in their company’s retirement plan. This means that 45% do not. With such an uncertain future for Social Security, this can leave almost 1 in 2 individuals without proper ..
Required Rate of Return Stock R has a beta of 2.4, Stock S has a beta of 0.65, the expected rate of return on an average stock is 13%, and the risk-free rate is 6%. By how much does the required return on the riskier stock exceed the required return ..
Killer Whale, Inc. has the following balance sheet statement items: total current liabilities of $693186; net fixed and other assets of $1832451; total assets of $3472745; and long-term debt of $806548. What is the amount of the firm's current assets..
Ogden Mear did an excellent job saving for retirement. He was able to save $1,000,000 in an account that pays 5 percent per year. His plan was to eventually withdraw all his money by paying himself in equal instalments every six months for the next 2..
The following estimates have been prepared for a project: Fixed costs: $36,000 Depreciation: $24,000 Sales price per unit: $4 Accounting break-even: 40,000 units What must be the variable cost per unit?
Assume a company does pay corporate income taxes and had debt in its capital structure. The capital structure theory indicates that:
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