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Growth and financing [LO4] Eli Lilly is very excited because sales for his nursery and plant company are expected to double from $570,000 to $1,140,000 next year. Eli notes that net assets (Assets − Liabilities) will remain at 50 percent of sales. His firm will enjoy a return on total sales of 9 percent. He will start the year with $170,000 in the bank and is bragging about the Jaguar and luxury townhouse he will buy. a. Compute his likely cash balance or deficit for the end of the year. Start with beginning cash and subtract the asset buildup (equal to 50 percent of the sales increase) and add in profit. (Negative amount should be indicated by a minus sign.) Ending cash balance $ b. Does his optimistic outlook for his cash position appear to be correct? Yes No
A business executive once stated, “Depreciation is one of our biggest operating cash inflows.” Do you agree? Explain.
Last year, DEF Corporation had sales of $315,000, net income of $17,832, and year-end total assets of $210,000. The firm's debt-to-assets ratio was 42.5%. What was DEF's Corp.'s Return on Equity (ROE)?
Alson needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs over the next 7 years, and you've decided to bid on the contract. Calculate all other cash flows except the OCF related to the contrac..
Your firm has net income of $338 on total sales of $1,420. Costs are $780 and depreciation is $120. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow?
Consider the following two mutually exclusive alternatives. Each alternative has a 10-year useful life and no salvage value. If the interest rate is 10%, which alternative should be selected? Answer in terms of benefit-cost ratio analysis.
You are considering an investment opportunity that costs $250,000 and will return 14% on your investment. There are higher returning investments available in the financial markets that are comparable to this investment opportunity in terms of risk. H..
Kristin Earhardt is a 26-year-old management trainee at a large chemical company. She is single and has no plans for marriage. Her annual salary is $34, 000 (placing her in the 1 5% tax bracket), and her monthly expenditures come to approximately $1 ..
You are an investment banker advising a Euro bank about a new international bond offering it is considering. The proceeds are to be used to fund Eurodollar loans to bank clients. What type of bond instrument would you recommend that the bank consider..
8 years ago, Maria's annual salary was $36,936. Today, she earns $61,262. What was the average annual growth rate of Maria's salary?
An investment project has annual cash inflows of $5,000, $5,500, $6,000, and $7,000, and a discount rate of 14 percent. What is the discounted payback period for these cash flows if the initial cost is $8,000?
What is the net present value of a commercial real estate investment with the following cash flows, if your required return is 12% of similar risk investments? The cost of retail storefront project is $500,000, but expect to be able to sell it after ..
Predicting Bond Values - It plans to sell the bonds at that time. What is the expected price it will sell the bonds for in three years?
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