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1. Calculate the annual percentage rate of forgoing the cash discount under each of the following credit terms: a. 2/10, net 60 b. 2/10, net 30.
2. Determine the annual financing cost of forgoing the cash discount if the credit terms are "1/10, net 30" and the invoice is not paid until it is 20 days past due.
3. Determine the annual financing cost of a 1-year (365 day), $10,000 discounted bank loan at a stated annual interest rate of 9.5 percent. Assume that no compensating balance is required.
Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent. Project Y Time: 0 1 2 3 4 Cash flow –$8,300 $3,410 $4,240 $1,580 $360 NPV $ should the project be accepted or rejected? Accepted Rejected
Assume that interest rate parity holds and that 90-day risk-free securities yield 3% in the United States and 3.6% in Germany. In the spot market, 1 euro equals $1.38 dollar. Is the 90-day forward rate trading at a premium or discount relative to the..
A 5-year corporate bond has an 8 percent yield. A 10-year corporate bond has a 9 percent yield. The two bonds have the same default risk premium and liquidity premium. The real risk-free rate, r*, is expected to remain constant at 3 percent.
Your firm’s discount rate is 15 percent. You are considering the purchase of Truck A or Truck B. Truck A costs $100, has a useful life of 3 years, no salvage value and maintenance costs of $10 per year. Truck B costs $80, has a useful life of 2 years..
Today is your retirement day (consider that day to be t=0). Your current life retirement savings have the (present) value of $2,000,000. Your retirement savings will be invested in an account earning r=6% per year for (at least) the next 30 years. St..
Looking at current 2015 numbers, plot the current yield curve from the interest rates of U.S. Treasury securities as found in WSJ or IBD, or examine the chart WSJ or IBD provides. Do not show the curve, but do describe and define it as Normal or inve..
If Southwick reduces their inventory by $500,000 through more efficient inventory management and invests the proceeds in marketable securities what happens to the Current, quick and debt to equity ratio?
Fee Founders has perpetual preferred stock outstanding that sells for $40.00 a share and pays a dividend of $5.00 at the end of each year. What is the required rate of return?
Seattle Grace Hospital plans to invest in a new piece of CT imaging equipment. The hospital estimates that it can bill $1,500 per scan. Preliminary market assessments indicate that demand will be fewer than 5,000 scans per year. What is the implied v..
question 1 prepare a short essay for each of the subsequent questions. where possible illustrate with an appropriate
Scare Train, Inc. has the following balance sheet statement items: current liabilities of $780,940; net fixed and other assets of $1,537,030; total assets of $3,424,010; and long term debt of $676,468. What is the amount of the firms’ net working cap..
Assets and costs are proportional to sales. The company maintains a constant 40 percent dividend payout ratio and a constant debt-equity ratio. What is the maximum increase in sales that can be sustained assuming no new equity is issued? (Do not roun..
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