Questions from Financial Management

Q: McDowell Industries sells on terms of 3/10, net 30

McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $912,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 40 days aft...

Q: Primrose Corp has $15 million of sales, $2 million

Primrose Corp has $15 million of sales, $2 million of inventories, $3 million of receivables, and $1 million of payables. Its cost of goods sold is 80% of sales, and it finances working capital with b...

Q: Microtech Corporation is expanding rapidly and currently needs to retain all of

Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning...

Q: Companies often have to increase their initial investment costs to obtain real

Companies often have to increase their initial investment costs to obtain real options. Why might this be so, and how could a firm decide if it was worth the cost to obtain a given real option?

Q: Refer to Problem 17-1. What additional funds would be

Refer to Problem 17-1. What additional funds would be needed if the company’s year-end 2008 assets had been $4 million? Assume that all other numbers are the same. Why is this AFN different from the o...

Q: Austin Grocers recently reported the following 2008 income statement (in millions of

Austin Grocers recently reported the following 2008 income statement (in millions of dollars): This year the company is forecasting a 25% increase in sales; and it expects that its year-end operating...

Q: Walter Industries has $5 billion in sales and $1.

Walter Industries has $5 billion in sales and $1.7 billion in fixed assets. Currently, the company’s fixed assets are operating at 90% of capacity. a. What level of sales could Walter Industries have...

Q: At the end of last year, Roberts Inc. reported the

At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars): Looking ahead to the following year, the company’s CFO has assembled this inf...

Q: A company’s 5-year bonds are yielding 7.75%

A company’s 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is 2.3%. The average inflation premium is 2.5%;...

Q: What are the key factors on which external financing depends, as

What are the key factors on which external financing depends, as indicated in the AFN equation?