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Dome Metals has credit sales of $180,000 yearly with credit terms of next 60 days, which is also the average collection period. Assume the firm adopts new credit terms of 3/18, net 60 and all customers pay on the last day of the discount period. Any reduction in accounts receivable will be used to reduce the firm's bank loan which costs 12 percent. The new credit terms will increase sales by 15 percent because the discount will make the firm's price competitive. If Dome earns 20 percent on sales before discounts, what will be the net change in income if the new credit terms are adopted? (Use a 360-day year.)
If considering an expansion project. To date, the company has spent $75,000 investigating the viability of the project and have decided to proceed. The proposed project will cost $450,000 in addition to the $75,000 that was spent on the feasibility s..
Initial investment: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 3 years ago at an installed cost of $20,000; it was being depreciated under..
Explain, with an example, how eco-efficiency can be implemented on an individual and a business scale.
Your firm is considering a new investment proposal and would like to calculate the weighted average cost of capital. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company? A preferred stock ..
Briefly list and describe capital market listing requirements for corporations that who wish to trade on the NYSE?
Assume that the CAPM holds. Assume also that the expected return on the market portfolio is 10%. If a stock with a beta of 2 has an expected return of 15% in this economy, what is the expected return on a stock with a beta of 0.5?
Of the capital budgeting techniques discussed, which works equally well with normal and non-normal cash flows and with independent and mutually exclusive project?
Consider a 3-month European put option on a non-dividend-paying stock, where the stock price is $60, the strike price is $60, the risk-free rate is 3% per annum. Stock price will either move up by 10% or down by 5%, every month. Price the put with bi..
Should the following project be accepted if the company requires both a payback on discounted cash flows within three years. payback on nominal dollars within three years
Calculate the cost of purchasing the equipment with debt, calculate the cost of leasing the equipment and calculate NAL? Should the company buy or lease the equipment
How can options sell for more than their exercise value and whats wrong with using payback period? What should we use instead? Why?
a project has an initial cost of 40000 expected net cash inflows of 9000 per year for 7 years and a cost of capital of
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