Questions from Corporate Finance


Q: The lag between the purchase date and the date on which payment

The lag between the purchase date and the date on which payment is due is known as the terms lag. The lag between the due date and the date on which the buyer actually pays is the due lag, and the lag...

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Q: The Branding Iron Company sells its irons for $50 apiece wholesale

The Branding Iron Company sells its irons for $50 apiece wholesale. Production cost is $40 per iron. There is a 25% chance that wholesaler Q will go bankrupt within the next year. Q orders 1,000 irons...

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Q: Look back at the discussion in Section 30-2 of credit

Look back at the discussion in Section 30-2 of credit decisions with repeat orders. If p1 = .8, what is the minimum level of p2 at which Cast Iron is justified in extending credit?

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Q: True or false? a. Exporters who require greater certainty

True or false? a. Exporters who require greater certainty of payment arrange for the customers to sign a bill of lading in exchange for a sight draft. b. It makes sense to monitor the credit manager...

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Q: You own a $1 million portfolio of aerospace stocks with a

You own a $1 million portfolio of aerospace stocks with a beta of 1.2. You are very enthusiastic about aerospace but uncertain about the prospects for the overall stock market. Explain how you could h...

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Q: How should your willingness to grant credit be affected by differences in

How should your willingness to grant credit be affected by differences in (a) the profit margin, (b) the interest rate, (c) the probability of repeat orders? In each case illustrate your answer wit...

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Q: Complete the passage that follows by choosing the appropriate terms from the

Complete the passage that follows by choosing the appropriate terms from the following list: lockbox banking, Fedwire, CHIPS, concentration banking. Firms can increase their cash resources by speeding...

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Q: In October 2008, six-month (182-day)

In October 2008, six-month (182-day) Treasury bills were issued at a discount of 1.4%. What was the annual yield?

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Q: For each item below, choose the investment that best fits the

For each item below, choose the investment that best fits the accompanying description: a. Maturity often overnight (repurchase agreements/bankers’ acceptances) b. Maturity never more than 270 days...

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Q: Some of the items in the previous problem involve a cash discount

Some of the items in the previous problem involve a cash discount. For each of these, calculate the rate of interest paid by customers who pay on the due date instead of taking the cash discount.

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