Questions from Corporate Finance

Q: Describe the risks that are associated with a restrictive current asset management

Describe the risks that are associated with a restrictive current asset management strategy?

Q: Sybex Corp. sells its goods with terms of 2/10

Sybex Corp. sells its goods with terms of 2/10 EOM, net 30. What is the implicit cost of the trade credit?

Q: Mill Street Corporation sells its goods with terms of 4/10

Mill Street Corporation sells its goods with terms of 4/10 EOM, net 60. What is the implicit cost of the trade credit?

Q: Why might a negotiated sale be the lowest cost means of issuing

Why might a negotiated sale be the lowest cost means of issuing a complex debt security?

Q: Pacific Traders has annual sales of $1,895,000

Pacific Traders has annual sales of $1,895,000. The firm’s financial manager has determined that using a lockbox will reduce collection time by 2.3 days. If the firm’s opportunity cost on savings is 5...

Q: The Kellogg Bank requires borrowers to keep an 8 percent compensating balance

The Kellogg Bank requires borrowers to keep an 8 percent compensating balance. Gorman Jewels borrows $340,000 at a 7 percent stated APR. What is the effective interest rate on the loan?

Q: What does “4/15, net 30” mean?

What does “4/15, net 30” mean?

Q: Morgan Contractors borrowed $1.75 million at an APR of

Morgan Contractors borrowed $1.75 million at an APR of 10.2 percent. The loan called for a compensating balance of 12 percent. What is the effective interest rate on the loan?

Q: Maltz Landscaping has an average collection period of 38 days for its

Maltz Landscaping has an average collection period of 38 days for its accounts receivable. Currently, Maltz factors all of its receivables at a 2 percent discount. What is the effective annual interes...

Q: Winegartner Cosmetics management is setting up a line of credit at the

Winegartner Cosmetics management is setting up a line of credit at the company’s bank for $5 million for up to two years. The interest rate is 5.875 percent and the loan agreement calls for an annual...