Quantity = 3000 X 120% = 3,600
SP = 50 x 110% = 55
Quantity x SP = 198,000
Less: Returned Sales = (6%x198,000)
Sales Projection = $186,120
Beginning Inventory $21 X 400 = 8400
Production $24 X 800 = 19200
Cost of Goods Sold 700 units
FIFO (21 X 400) + (24 X 300) = $15,600
Beginning Inventory $10 X 725 = 8400
Production $14 X 650 = 19200
Cost of Goods Sold 700 units
LIFO (14 X 650) + (10 X 350) = $12,600
Sales and Cash Collections Budget
Quarter Ending Dec 31st, 2011
Total
Sales:
Total sales
$25,000
$35,000
$30,000
$90,000
Total cash sales (40%)
$5,000
$7,000
$6,000
$18,000
Total credit sales (60%)
$20,000
$28,000
$24,000
$72,000
Cash collections:
Current month cash sales
$5,000
$7,000
$6,000
$18,000
Collection of credit sales
$20,000
$28,000
$24,000
Total cash collections
$5,000
$27,000
$34,000
$42,000
Quarter end receivables
$72,000
Cash Budget
Quarter Ending Dec 31, 2011
October
November
December
Total
Receipts:
Cash, beginning balance
$0
$6,000
$6,000
$12,000
Collections from customers
$5,000
$27,000
$34,000
$66,000
Total cash available
$5,000
$33,000
$40,000
$78,000
Total disbursements
$0
$30,400
$29,800
$60,200
Excess (deficiency) of cash
$5,000
$2,600
$10,200
$17,800
Draws online of credit
$1,000
$3,400
$0
$4,400
Repayments
$0
$0
$4,200
$200
Cash, ending balance
$6,000
$6,000
$6,000
$22,000
5.
a) PV = 8000/(1+ 0.06)10 = $4,467.16
b) PV = 16000/(1+ 0.12)5 = $9,078.83
c) PV = 25000/(1+ 0.08)15 = $7,881.04
6.
a. FV = 12000 X (1+ 0.07)6 = $18,008.76
b. FV = 12000 X (1+ 0.12)15 = $65,682.79
c. FV = 12000 X (1+ 0.10)25 = $130,016.47
13
WACC = Ke [Ve / (Ve + Vd )] + Kd [Vd/(Ve + Vd)]
= 17% [0.5] + 5% [0.5]
= 11%
Project A should be accepted
14. Airborne airlines, Inn. Has a $1,000 par value bond outstanding with 25 years to maturity. The bond carries an annual interest payment of $75 and is currently selling for $875. Airborne is in the 30% tax bracket. The firm wishes to know what the after tax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as yield to maturity on old issue because the risk and maturity date will be similar.
a. compute the approximate yield to maturity and what on the old issue and use this as the yield for the new issue. B. make the appropriate tax adjustment to determine the after tax cost of debt.
15. United Business forms' capital structure is as follows:
a. debt- 35% b. preferred stock - 15 c. common equity- 50.
After tax cost of debt is 7% the cost of preferred stock is 10%, and the cost of common equity in the form of retained earnings is 13%. Calculate United business forms' weighted average cost of capital.
16. Assume a firm has earnings before depreciation and taxes of 500,000 and no depreciation, It is in a 40% tax bracket.
17. Assume a 200,000 investment and the following cash flows for two products:
18. You buy a new piece of equipment for $11,778 and you receive a cash inflow of 2,000 per year for 10 years. What is the internal rate of return ?
19. The Pan America Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and saving money. The net cost of this machine is $45,000. The annual cash flow have the following projection
Year cash flow
1 -15,000
2 -20,000
3 -25,000
4 -10,000
5 -5,000
20. The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF) in June of 2009:
Spot-$0.8466
30-day forward-$0.8504
90-day forward-$0.8540
180-day forward-$0.8587
a. Was the Swiss franc selling at a discount or premium in the forward market?
b. What was the 30-day forward premium (or discount)?
c. What was the 90-day forward premium (or discount)?
d. Suppose you executed a 90-day forward contract to exchange 100,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?
e. Assume a Swiss bank entered a 180-day forward contract with Citicorp to buy $100,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars?
21. Suppose a Polish zloty is selling for $0.3399 and a British pound is selling for $1.448. What is the exchange rate (cross rate) of the Polish zloty to the British pound? That is, how many Polish zlotys are equal to a British pound?
22. An investor in the United States bought a one-year Singapore security valued at 150,000 Singapore dollars. The U.S. dollar equivalent was $100,000. The Singapore security earned 15% during the year but the Singapore dollars. The U.S. dollar equivalent was $100,000. The Singapore dollar depreciated 5 cents against the U.S. dollar during the same time period ($0.67/SD to $0.62/SD). After transferring the fund back to the United States, what was the investor's return on his $100,000? Determine the total ending value of the Singapore investment in Singapore dollars and then translate this value to U.S. dollars by multiplying by $062. Then compute the return on the $100,000.
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