Initiating a cash discount; a company is considering offering a 1% discount for payment within 15 days, the current average collection period is 60 days. Sales are 40,000 units and the selling price is $42 per unit. Variable cost per unit is $31. Thefirm expects that the change in credit terms will result in an increase in sales to 43,000 units. That 70% of the sales will take the discount and average collection period will fall to 30 days. If the firms required rate of return on equal-risk investments is 25% should the proposed discount be offered?

The additional profit contribution from additional sales is $___.

## Firm evaluates all of projects by applying NPV decision ruleA firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 –$ 27,700 1 11,700 2 14,700 3 10,700 what is the NPV for the project if the required return is 12 per.. |

## Before-tax component cost of debtOberon, Inc., has a $25 million (face value) 12-year bond issue selling for 98 percent of par that pays an annual coupon of 8.05 percent. What would be Oberon’s before-tax component cost of debt? |

## What is the price of two year swap beginning in one yearSuppose oil forward prices for 1-, 2-, and 3-year contracts are $20, $21, and $22. The 1-year effective annual interest rate is 6%, the 2-year interest rate is 6.5%, and the 3-year interest rate is 7%. What is the price of a 2-year swap beginning in .. |

## Purchase of a share of blue grassYou are considering the purchase of a share of blue grass, inc. Common stock. You expect to sell it at the end of one year for $87 per share. You will also receive a dividend of $5.36 per share at the end of the next year. If your required return on .. |

## What is percentage price change of these bondsBond J is a 7 percent coupon bond. Bond K is a 13 percent coupon bond. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of .. |

## How long will it take for the account to be paid offOne of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $660 per month. You will charge 1.06 percent per month interest on the overdue balance. Required: If the current balance is $14,880.. |

## Find the total paymentOn September 1, 2009, Susan Chao bought a motorcycle for $26,000. She paid $1,200 down and financed the balance with a five-year loan at a stated annual interest rate of 6.8 percent, compounded monthly. She started the monthly payments exactly one mo.. |

## Firm sell to break-even on a cash basisThe Motor Works is considering an expansion project with estimated annual fixed costs of $71,000, depreciation of $38,500, variable costs per unit of $17.90 and an estimated sales price of $26.50 per unit. How many units must the firm sell to break-e.. |

## Leverage have benefits and definitely produce gainsWhile leverage an have its benefits and definitely produce gains, similar to situations involving an organization can face similar issues when given that an organization would want to avoid failure and financial distress, what are the common signs of.. |

## Distinguished from real assets in that financial assetFinancial assets can be distinguished from real assets in that financial asset: |

## Rate of return-compounded annuallyMs. Early Saver has decided to invest $1,000 at the end of each year for the next 10 years, then she will just let the amount compound for 40 additional years. Her brother, Late Saver, has a different investment program: He will invest nothing for th.. |

## Present worth equivalent cost to the contractor of owningA grader costs $350,000 to purchase and is expected to have a useful life of 8 years. Annual operating and maintenance costs are estimated to be $35,000 per year, and the salvage value after 8 years of use is estimated to be $50,000. At an interest r.. |

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