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Peterson Electronics uses a decentralized collection system whereby customers mail their payments to one of six regional collection centers. The checks are deposited each working day in the collection center's local bank, and a depository transfer check for the amount of the deposit is mailed to the firm's concentration bank in New York. An average of 5 days elapse between the time the checks are deposited in the local bank and the time the funds become collected funds (and available for disbursements) at the concentration bank. Peterson is considering using wire transfers instead of depository transfer checks in moving funds from the six collection centers to its concentration bank. Wire transfers would reduce the elapsed time by 3 days. Depository transfer checks cost $0.50 (including postage), and wire transfers cost $10. Assume there are 250 working days per year. Peterson can earn 7 percent before taxes on any funds that are released through more efficient collection techniques. Determine the net (pretax) benefit to Peterson of using wire transfers if annual sales are
a. $15 million
b. $75 million
Suppose Peterson is considering using electronic depository transfer checks, rather than mail depository transfer checks, to move funds from its six collection centers to its concentration bank. Electronic depository transfer checks would reduce collec- tion time by 2 days and would cost $2.50 each. Determine the net (pretax) benefit to Peterson of using electronic depository transfer checks if annual sales are
c. $15 million
d. $75 million
X Firm is considering investing in a complete small business computer system. The initial investment will be $50,000. The computer is in the 5-year MACRS category, and the firm's tax rate is 34%. Calculate the net after-tax cash flows from this inves..
The price of a 1-year zero is $96.00, the price of a 2-year 10% coupon bond is $107.30 and the price of a 3-year 8% coupon bond is $102.25. Use the bootstrap method to calculate all zero rates.
The Final Paper will involve applying the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company and write a report..
List the three primary sources of revenue from a commercial customer's account. In today's economic environment, indicate whether each is growing or declining in use and explain why.
The spot rate of the New Zealand dollar is $.70. A call option on New Zealand dollars with a 1-year expiration date has an exercise price of $.71 and a premium of $.02. A put option on New Zealand dollars at the money with a 1-year expiration date ha..
You manage a risky portfolio with expected rate of return of 18% and standard deviation of 28%. The T-bill rate (lending rate) is 8% and borrowing rate is 10%. Your client’s degree of risk aversion is A = 3.5. Calculate the Sharpe-Ratio (reward-to-va..
Kuhn Company is considering a new project that will require an initial investment of $4 million. It has a target capital structure of 58% debt, 6% preferred stock and 36% common equity. Flotation costs will represent 8% of the funds raised by issuing..
A $1,000 corporate bond with 20 years to maturity pays a coupon of 7% (semi-annual) and the market required rate of return is a0 6.6% b) 13%. What is the current selling price for a) and b)?
A stock is trading at $40 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 14%
Suppose the following data are given. The current price of XYZ stock is $38/share. XYZ does not pay a dividend. The (annualized) six-month interest rate is 4%. There are six-month call and put options on XYZ stock.
She has negotiated a sales price of $35,000 and she has a $5,000 down payment. She is eligible for the full $8,000 cash rebate. Her bank has pre-approved her for a 5 year car loan at 8%. Assuming Alejandra wants the cheapest overall price, which opti..
Which statement about bond prices is most accurate?
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