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For the year just ended, WestPoint Ltd. had $500,000 in credit sales monthly with an average maturity of receivables of 45 days. WestPoint Ltd uses a factor to obtain funds 15 days after the sales. This means the factor is advancing funds for 30days. The factor charges 10.5 percentage interest (APR), 2.5 percentage over the current prime rate of 8 percentage. In addition, the factor charges 1.5 percentage fee for processing the receivables and assuming all credit risk. If WestPoint ran its own credit department, it would cost $2,000 per month in variable expenses and this saved with factoring. What is the effective cost of borrowing?
Compute the price of the bill. Compute the bond equivalent yield.
Investments B and C both have the same standard deviation of 20% and have the same correlation to the market portfolio. If the expected return on B is 15% and the expected return on C is 18%, which investment would investors prefer? The market return..
What is the IRR for each project? What is the NPV for each project?
Whose viewpoint represents the proper objective for the budgeting process?
Then, compare the most appropriate hedge to an unhedged strategy, and decide whether Black Rod should hedge its payables position.
Peterboro Supply has a current accounts receivable balance of $391,648. Credit sales for the year just ended were $5,338,411. How long did it take on average for credit customers to pay off their accounts during the past year? Select one: a. 24.78 da..
The discrepancy between the feasibility of a project in a host country from the perspective of the U.S. parent versus the subsidiary administering the project is likely to be greater for projects in countries where:
Essary Enterprises has bonds on the market making annual payments, with eleven years to maturity, a par value of $1,000, and selling for $958. At this price, the bonds yield 6.4 percent. What must the coupon rate be on the bonds?
Nonconstant Growth Valuation A company currently pays a dividend of $1.5 per share (D0 = $1.5). It is estimated that the company's dividend will grow at a rate of 24% per year for the next 2 years, then at a constant rate of 5% thereafter. The compan..
You have your choice of two investment accounts. Investment A is a 9-year annuity that features end-of-month $1,780 payments and has an interest rate of 9 percent compounded monthly. Investment B is an annually compounded lump-sum investment with an ..
A firm has stock outstanding with a current price of $25 per share. The price in one period is expected to be either $30 or $35. A call option on ONE share is available with an exercise price of $20. If the risk-free rate of interest is 5%, what woul..
Assume that the strike price will be 10% above today's stock value and calculate the price of this option. Provide an explanation that supports your findings.
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