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1. You have just been hired as the cash manager of the Lamm Company. Your first task is to determine the target cash balance. The firm expects to need $1,000,000 of net new cash during the coming year. This requirement occurs at a relatively constant rate over the year. The firm plans to meet this cash requirement by borrowing from Bank A at an annual rate of 10%. The fixed cost of transferring funds from the bank is $50 per transfer.
What average cash balance is indicated by the Baumol model? How many cash transfers are expected over the year?
2. What are the general benefits and costs of relaxing a firm's credit term?
Lloyd Blankfein would like to supplement his low pension paid by his employer Goldman Sacks. His personal banker Jamie Dimon told him that he could pay $1,000 every month for ten years (making 10 × 12 = 120 payments at the end of each month until her..
One of your friends is contemplating opening a coffee shop near your college campus. She seeks your advice about size of the prospective customer base and how to market the business according to the four Ps. "Price, product, promotion, place" What st..
Scare Train, Inc. has the following balance sheet statement items: current liabilities of $720,921; net fixed and other assets of $1,520,310; total asets of $3,001,930; and long-term debt of $955,846. What is the amount of hte firm's net working capi..
Jim Haught, D.D.S., opened an incorporated dental practice on January 1, 2014. During the first month of operations, the following transactions occurred. 1. Performed services for patients who had dental plan insurance. At January 31, $780 of such se..
In recent years German automobile manufacturers have made significant direct foreign investments in the U. S. Their main motive in doing so is attributable to
A company has $317,000 in credit sales. The company uses the allowance method to account for uncollectible accounts, and the Allowance for Doubtful Accounts now was an $8,150 debit balance. If the company estimates 6% of credit sales will be uncollec..
A sensible cash management policy would be to: A. have enough cash on hand to meet ordinary course of business and some excess cash to invest in marketable securities as a precautionary measure. B. have nearly enough cash on hand to meet ordinary cou..
You purchase a 6 percent $10,000 bond for $9,350 plus $163 in accrued interest for a total outlay of $9,513. Subsequently you receive a $350 interest payment. You are in the 20 percent income tax bracket. How much tax do you owe on the interest payme..
Consider a world of perfect capital markets. This world has no corporate or personal taxes, all investors have homogeneous expectations, no bankruptcy costs, and M&M’s no-tax theory of capital structure is true. What is the firm’s return on equity? W..
What is a price to sales ratio; how is it used to value a company? Pick a publicly traded company, do a fundamental analysis and a valuation using one of the methods in Chapter 8 (Stock Valuation). Describe and explain American Depositary Receipts (A..
Calculate the overall and per-share market value of the Beta Company at the end of 2009 and each of the two following years (2010 and 2011).
Neal Enterprises has no debt. Its current total value is $74 million. Assume debt proceeds are used to repurchase equity. Ignoring taxes, what will the company’s value be if it sells $34 million in debt? Suppose now that the company’s tax rate is 35 ..
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