Financial Management Problems

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.