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Langley Clinics, Inc buys $400,000 in medical supplies each year (at gross prices) from its major suppliers, consolidated services, which offers Langley terms of 2.5/10, net 45. Currently, Langley is paying the supplier the full amount due on day 45 but it is considering taking the discount paying on day 10, and replacing the trade credit with a bank loan that has a 10% annual cost.
b. What is the amount of costly trade credit?c. What is the approximate annual cost of the costly trade credit?d. Should Langley replace its trade credit with the bank loan? Explain.
If Cameron makes no new charges on the credit card while making only the mininum monthly payment.
Objective type questions on cost of capital and WACC and he company currently has no debt in its capital structure
What strategies could management employ to hedge against this risk by buying or selling futures, call options or put options (i.e., for each derivative is it a buy or sell strategy?)?
Doherty Industries wants to invest in a new computer system. The company only wants to invest in one system, and has narrowed the choice down to System A and System B.
The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely NPV is $120,000, but, as evidenced by the following NPV distribution, there is considerable risk involved.
How should environmental effects be considered when evaluating this, or any other project? How might these affects change your decision in Part b?
The exercise price on one of Flanagan Company's options is $15, its exrcise value is $22, and its time value is $5. What are the option's market value and the price of the stock?
A 15 year bond issued today by Carris, Inc. has a coupon rate of 7%, a required return of 5% and a face value of $1000. The bond will be sold 4 years from now when interest rates will be 8%. What is the ending value of the bond when it is sold (to..
How should a corporation estimate the amount of financing that must be raised externally during a given year? Once that amount is known, what other decision must be made?
Imagine a startup company of your own and briefly trace its development from a sole proprietorship to a major corporation with a focus on how that development would be financed.
AFB has entered into a contract to produce and sell an additional 15,000 latches in the coming year. Use the DOL, DFL and DTL to predict and calculate the changes in EBIT and earnings for common stock.
Calculating multiple cash flows for a year and the amount of the annuity shown below is the amount of each individual cash flow
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