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

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…