Questions from Corporate Finance

Q: Your firm is contemplating the purchase of a new $535,

Your firm is contemplating the purchase of a new $535,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $30,000 at t...

Q: Asset W has an expected return of 8.8 percent and

Asset W has an expected return of 8.8 percent and a beta of .90. If the risk-free rate is 2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the rela...

Q: You have $100,000 to invest in a portfolio containing

You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.1 percent. If Stock X has an expected return of 10.28 pe...

Q: Your firm has an average collection period of 38 days. Current

Your firm has an average collection period of 38 days. Current practice is to factor all receivables immediately at a discount of 1.75 percent. What is the effective cost of borrowing in this case? As...

Q: Sexton Corp. has projected the following sales for the coming year

Sexton Corp. has projected the following sales for the coming year: Sales in the year following this one are projected to be 15 percent greater in each quarter. a. Calculate payments to suppliers as...

Q: The Bandon Pine Corporation’s purchases from suppliers in a quarter are equal

The Bandon Pine Corporation’s purchases from suppliers in a quarter are equal to 75 percent of the next quarter’s forecast sales. The payables period is 60 days. Wa...

Q: In a typical month, the Montrose Corporation receives 90 checks totaling

In a typical month, the Montrose Corporation receives 90 checks totaling $85,000. These are delayed four days on average. What is the average daily float? Assume 30 days in a month.

Q: No More Books Corporation has an agreement with Floyd Bank whereby the

No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $3.4 million in collections per day and requires a $320,000 compensating balance. No More Books is contemplating can...

Q: Bird’s Eye Treehouses, Inc., a Kentucky company, has determined

Bird’s Eye Treehouses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a b...

Q: Each business day, on average, a company writes checks totaling

Each business day, on average, a company writes checks totaling $19,500 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its...