Questions from Corporate Finance

Q: Assume your beginning debt in Problem 2 is $100,000

Assume your beginning debt in Problem 2 is $100,000. What amount of equity and what amount of debt would you need to issue to cover the net new financing in order to keep your debt-equity ratio consta...

Q: Use the following income statement and balance sheet for Jim’s Espresso:

Use the following income statement and balance sheet for Jim’s Espresso: Jim’s expects sales to grow by 10% next year. Using the percent of sales method, forecast:...

Q: Your supplier offers terms of 1/10, net 45.

Your supplier offers terms of 1/10, net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45?

Q: The Fast Reader Company supplies bulletin board services to numerous hotel chains

The Fast Reader Company supplies bulletin board services to numerous hotel chains nationwide. The owner of the firm is investigating the desirability of employing a billing firm to do her billing and...

Q: The Saban Corporation is trying to decide whether to switch to a

The Saban Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban’s customers. Saban’s financial manager believes the new system would d...

Q: Milton Industries expects free cash flows of $5 million each year

Milton Industries expects free cash flows of $5 million each year. Milton’s corporate tax rate is 35%, and its unlevered cost of capital is 15%. The firm also has outstanding debt of $19.05 million, a...

Q: The Manana Corporation had sales of $60 million this year.

The Manana Corporation had sales of $60 million this year. Its accounts receivable balance averaged $2 million. How long, on average, does it take the firm to collect on its sales?

Q: The Mighty Power Tool Company has the following accounts on its books

The Mighty Power Tool Company has the following accounts on its books: The firm extends credit on terms of 1/15, net 30. Develop an aging schedule using 15-day increments through 60 days, and then ind...

Q: Simple Simon’s Bakery purchases supplies on terms of 1/10,

Simple Simon’s Bakery purchases supplies on terms of 1/10, net 25. If Simple Simon’s chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local ba...

Q: Your firm purchases goods from its supplier on terms of 3/

Your firm purchases goods from its supplier on terms of 3/15, net 40. a. What is the effective annual cost to your firm if it chooses not to take the discount and makes its payment on day 40? b. What...