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The Raattama Corporation had sales of $3.5 million last year, and it earned a 5 percent return, after taxes, on sales. Recently, the company has fallen behind in its accounts payable. Although its terms of purchase are net 30 days, its accounts payable represent 60 days" purchases. The company"s treasurer is seeking to increase bank borrowings in order to become current in meeting its trade obligations (that is, to have 30 days" payables outstanding). The company"s balance sheet is as follows (thousands of dollars):
Cash
$ 100
Accounts payable
$ 600
Accounts receivable
300
Bank loans
700
Inventory
1,400
Accruals
. 200
Current assets
$1,800
Current liabilities
$1,500
Land and buildings
600
Mortgage on real estate
Equipment
Common stock, $0.10 par
Retained earnings
500
Total assets
$3,000
Total liabilities and equity
a. How much bank financing is needed to eliminate the past-due accounts payable?
b. Would you as a bank loan officer make the loan? Why or why not?
Your firm has an average collection period of 27 days. Current practice is to factor all receivables immediately at a 1.70 percent discount.
assume you work for one of the following companies 1 philadelphia soft pretzel factory 2 ritas water ice or 3
An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $16,560,000 and will be sold for $3,680,000 at the end of the project.
You find a stock that had returns of 14 percent, -27 percent, 19 percent, 21 percent for four of the last five years . The average return of stock over this period was 9.5 percent. What is the standard deviation of the stock's returns?
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Currently, bonds of this particular risk class are yielding investors 9 percent. A cash shortage has forced you to instruct your treasurer to liquidate the bond.
Given all the service guarantees we see or hear on a daily bases, do these really make you feel better about the services you are paying for at the bank, restaurant, cable company or retail store?
Which one of the following risks is irrelevant to a well-diversified investor?
Suppose a firm has been growing at a 15% yearly rate and is expected to continue to do so for 3 more years. At that time, growth is expected to slow to a constant 4% rate.
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