Quantitative Problem:

Adams Manufacturing Inc. buys $10.3 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo discounts, how much additional credit could it obtain? Round your answer to the nearest cent. Do not round your intermediate calculations. Use 365 day in a year.

$________

What would be the nominal and effective cost of such a credit? Round your answer to 2 decimal places. Do not round intermediate calculations. Use 365 day in a year.

Nominal cost:___ %

Effective cost: ___%

If the company could receive the funds from a bank at a rate of 8.75%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Round your answer to 2 decimal places. Do not round intermediate calculations.

_____%

How many coffee machines must be sold for firm to break even : Suppose that a firm manufactures coffee machines and sells them for $170 each. The costs incurred during the production and sale of these machines are $566921 plus $59 for each machine produced and sold. How many coffee machines must be sold for the .. |

Calculate the depreciation tax shield for project in year : Your firm needs a computerized machine tool lathe which costs $52,000 and requires $12,200 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category... |

About the salvage value after tax : Your firm needs a computerized machine tool lathe which costs $53,000 and requires $12,300 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. If the lathe can be sold for $5,300 at the end of year 3, wh.. |

Pitfalls in evaluating risky projects : According to the article "Pitfalls in Evaluating Risky Projects" by James E. Hodder, What are the three pitfalls that can be encountered when the DCF methodis used to make decisions? |

What would be the effective cost of the bank loan : Adams Manufacturing Inc. buys $10.3 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. What would be the nomin.. |

Please evaluate the equal annual annuity : Please evaluate the equal annual annuity for the following repeated project. The initial investment for the project is $1 million and it will produce cash flows $0.5 million, $1.0 million, $0.8 million in year 1, 2 and 3. The discount rate is 5%. |

Evaluating two different cookie-baking ovens : You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $70,000, has a 5-year life, and has an annual OCF (after tax) of –$11,300 per year. The Keebler CookieMunster costs $96,500, has a 7-year life, and has an annual OCF (after.. |

Leaving the irr the same for moderate risk projects : Meds R Us has just finished evaluating several projects. Their cost of capital is 10%. NPV’s are calculated by the firm’s current cost of capital. Meds R Us now performs a risk assessment of the projects. They adjust for project risk by raising the c.. |

Finished evaluating several projects : Meds R Us has just finished evaluating several projects. Their cost of capital is 10%. NPV’s are calculated by the firm’s current cost of capital. If Meds R Us has a Capital Budget limit of $120,000, and assuming the projects are of the same risk, wh.. |

## Issue of preferred stock outstandingValuing Preferred Stock: Gesto, Inc., has an issue of preferred stock outstanding that pays a $5 dividend every year, in perpetuity. If this issue currently sells for $84.12 per share, what is the required return? |

## Taxes should the company change its debt-equity ratioMM Tool Manufacturing has an expected EBIT of $67,000 in perpetuity and a tax rate of 35 percent. The firm has $130,000 in outstanding debt at an interest rate of 8 percent, and its unlevered cost of capital is 15 percent. What is the value of the co.. |

## What is the annual dollar amount of interestAssume that three years ago you purchased a corporate bond that pays 8.5 percent. The purchase price was $1070. What is the annual dollar amount of interest that you receive from your bond investment? |

## Calculate the internal rate of return for projectYou are considering a an investment in a project with a life of eight years, an initial outlay of $120,000, and annual after-tax cash flow of $52,000. Calculate the payback period for this project assuming cash flows are evenly distributed across the.. |

## Several terms unique to auto leasesAuto mobiles are often leased, and there are several terms unique to auto leases. Suppose you are considering a car. The price you and the dealer agree on for the car is $36,000. This is the base capitalized cost. What APR is the dealer quoting you? .. |

## What growth rate of earnings would you forecast for DFBDFB, Inc. expects earnings this year of $5.16 per share, and plans to pay a $3.30 dividend to shareholders. DFB will retain $1.86 per share of its earnings to reinvest in projects that have an expected return of 14.8% per year. What growth rate of ea.. |

## Standard deviation of return on your clients portfolioYou manage an equity fund with an expected risk premium of 10% and a standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. Wh.. |

## What is the required return-next dividend paymentThe next dividend payment by Blue Cheese, Inc., will be $1.56 per share. The dividends are anticipated to maintain a growth rate of 4 percent forever. If the stock currently sells for $29 per share, what is the required return? |

## Pretax cost savings do we require for project to profitableA proposed cost-saving device has an installed cost of $630,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $45,000, the margi.. |

## Fixed asset is fully depreciated over life of the projectA five-year project has an initial fixed asset investment of $290,000, an initial NWC investment of $26,000, and an annual OCF of −$25,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re.. |

## Expected net present value and standard deviationGrow Corp is a medium sized commodity producer. It is already involved with industries such as oil and gas, forest products and gold exploration. Grow Corp operates in Australasia as well as in North America and the company exports everywhere in the .. |

## Reduce its exposure to exchange rate risk by borrowingA U.S. firm has a Canadian subsidiary that remits a large amount of its earnings to the parent on an annual basis. It also imports supplies from China, invoiced in Chinese yuan. The firm has no other foreign business, and needs a small loan. The firm.. |

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