Questions from Managerial Finance

Q: Lincoln Industries has a line of credit at Bank Two that requires

Lincoln Industries has a line of credit at Bank Two that requires it to pay 11% interest on its borrowing and to maintain a compensating balance equal to 15% of the amount borrowed. The firm has borro...

Q: Weathers Catering Supply Inc. needs to borrow $150,000

Weathers Catering Supply Inc. needs to borrow $150,000 for 6 months. State Bank has offered to lend the funds at a 9% annual rate subject to a 10% compensating balance. (Note: Weathers currently maint...

Q: Cumberland Furniture wishes to establish a prearranged borrowing agreement with a local

Cumberland Furniture wishes to establish a prearranged borrowing agreement with a local commercial bank. The bank’s terms for a line of credit are 3.30% over the prime rate, and each year the borrowin...

Q: Commercial paper is usually sold at a discount. Fan Corporation has

Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 90-day commercial paper with a face value of $1 million. The firm has received initial proceeds of $978,000. (...

Q: Kansas City Castings (KCC) is attempting to obtain the maximum

Kansas City Castings (KCC) is attempting to obtain the maximum loan possible using accounts receivable as collateral. The firm extends net-30-day credit. The amounts that are owed KCC by its 12 credit...

Q: Springer Products wishes to borrow $80,000 from a local

Springer Products wishes to borrow $80,000 from a local bank using its accounts receivable to secure the loan. The bank’s policy is to accept as collateral any accounts that are norm...

Q: Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc

Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $134,000 that it will accept as collateral. The bank’s terms include a lendin...

Q: Finance factors the accounts of the Holder Company. All eight factored

Finance factors the accounts of the Holder Company. All eight factored accounts are shown in the following table, with the amount factored, the date due, and the status on May 30. Indicate the amounts...

Q: The board of Kopi Industries is considering a new dividend policy that

The board of Kopi Industries is considering a new dividend policy that would set dividends at 60% of earnings. The recent past has witnessed earnings per share (EPS) and dividends paid per share as sh...

Q: Determine the cost of giving up the discount under each of the

Determine the cost of giving up the discount under each of the following terms of sale. (Note: Assume a 365-day year.) a. 2/10 net 30. b. 1/10 net 30. c. 1/10 net 45. d. 3/10 net 90. e. 1/10 net 60. f...