Questions from Corporate Finance

Q: Based on the Miller–Orr model, describe what will happen to

Based on the Miller–Orr model, describe what will happen to the lower limit, the upper limit, and the spread (the distance between the two) if the variation in net cash flow grows. Give an intuitive e...

Q: The variance of the daily cash flows for the Pele

The variance of the daily cash flows for the Pele Bicycle Shop is $890,000. The opportunity cost to the firm of holding cash is 7 percent per year. What should the target cash level and the upper limi...

Q: Bismark Co. is in the process of considering a change

Bismark Co. is in the process of considering a change in its terms of sale. The current policy is cash only; the new policy will involve one period’s credit. Sales are 40,000 units per period at a pri...

Q: You own a portfolio equally invested in a risk free

You own a portfolio equally invested in a risk free asset and two stocks. If one of the stocks has a beta of 1.38 and the total portfolio is equally as risky as the market, what must the beta be for t...

Q: The Johnson Company sells 3,300 pairs of running shoes per

The Johnson Company sells 3,300 pairs of running shoes per month at a cash price of $90 per pair. The firm is considering a new policy that involves 30 days’ credit and an increase in price to $91.84...

Q: Silicon Wafers, Inc. (SWI), is debating whether or not to

Silicon Wafers, Inc. (SWI), is debating whether or not to extend credit to a particular customer. SWI’s products, primarily used in the manufacture of semiconductors, currently sell for $1,140 per uni...

Q: Consider the following information about two alternative credit strategies:

Consider the following information about two alternative credit strategies:The higher cost per unit reflects the expense associated with credit orders, and the higher price per unit reflects the exist...

Q: Suppose a corporation currently sells Q units per month for

Suppose a corporation currently sells Q units per month for a cash-only price of P . Under a new credit policy that allows one month’s credit, the quantity sold will be Q and the price per unit will b...

Q: Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials

Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $5.43 per unit, and the variable labor cost is $3.13 per unit.a. What is the variable cost per unit?b. Suppose N...

Q: Consider a project with the following data: accounting break-even quantity

Consider a project with the following data: accounting break-even quantity = 15,500 units; cash break-even quantity = 13,200 units; life = five years; fixed costs = $140,000; variable costs = $24 per...