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The new credit manager of Kay's department store plans to liberalize the firm's credit policy. The firm currently generates credit sales of $575,000 annually. The more lenient credit policy is expected to produce credit sales of $750,000. The bad debt losses on additional sales are projected to be 5% despite an additional $15,000 collection expenditure. The new manager anticipates production and selling costs other than additional bad debt and collection expense will remain at the 85% level. The firm is in the 34% tax bracket.A. If the firm maintains its receivables turnover of 10times, how much will the receivables balance increase?B. What would be Kay's incremental after-tax return on investment?C. Assuming additional inventory of $35,000 is required to support the additional sales compute the after-tax return on investment?
Determine break-even point? If an organization's fixed costs increase, what happens to the break-even point? Explain how can the break-even point be lowered?
Overtime Company expects an EBIT of $35,000 each year forever. Overtime Company currently has no debt, and its cost of equity is 14 percent.
The Employee Retirement Income Security Act of 1974 (ERISA) established which of the following..
Ramon Inc. reported net income of $300,000 for the year ended December 31, 2006. Ramon Inc. had 50,000 shares of common stock outstanding throughout 2006. On January 1, 2006, Ramon Inc. issued 500, five-year, $1,000 face value bonds at par.
Objective type questions on cash balances and there is a constant rate of cash disbursement and no cash receipts during the month
Determine the net present value of a project that need a net investment of $76,000 and create net cash flows of $22,000 every year for seven years?
Participant in a stock bonus plan
Assume the current spot rate is C$1.1875 and the one-year forward rate is C$1.1724. The nominal risk-free rate in Canada is 4 percent while it is 3 percent in the U.S.
Suppose your younger sister tells you that she now has a job that pays United State $1,300 per month, however, she is spending United State $1,700 per month and taking on more credit card debt to meet her monthly bills.
Stock A has a beta of 1.2 and a standard deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20 percent. Portfolio AB was created by investing in a combination of Stock A and Stock B.
Suppose that interest rate parity holds. In both the spot market and the 90-day forward market 1 Japanese yen = 0.0086 dollar. And 90-day risk-free securities yield 4.6% in Japan.
Describe and discuss the significance of the following time value of money concepts including compounding (future value), discounting (present value) and annuities.
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