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Objective type questions on working capital management
1. Cross Collectibles currently fills mail orders from all over the U.S. and receipts come in to headquarters in Little Rock, Arkansas. The firm's average accounts receivable (A/R) is $2.5 million and is financed by a bank loan with 11 percent annual interest. Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent. The annual cost of the system is $15,000. What is the estimated net annual savings to the firm from implementing the lockbox system?
2. Ski Lifts Inc. is a highly seasonal business. The following summary balance sheet provides data for peak and off-peak seasons (in thousands of dollars):
Peak Off-peak
Cash
$ 50
$ 30
Marketable securities
0
20
Accounts receivable
40
Inventories
100
50
Net fixed assets
500
$690
$620
Spontaneous
liabilities
$ 10
Short-term debt
Long-term debt
300
Common equity
310
From this data we may conclude that
3. Which one of the following aspects of banks is considered most relevant to businesses when choosing a bank?
Loyalty and willingness to assume lending risks
Use Black-Scholes-Merton model to find out the price of a 3-month European call on stock with strike price of= $40.
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Explain assessing the return compared with the overall market return and what net return did you earn on your share investment
Computation of various financial ratios from the given information and obtained from the accounting records of Hamberg Company at the end of its fiscal year
If opportunity cost of capital is 14%, compute the present value of business owners' equity at commencement of year.
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Explain Capital budgeting involves calculation of NPV and IRR and Which projects will the firm select for investment
Susie can earn the nominal annual rate of return of= 12%, compounded semi-annually.
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