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Chapter 3: 4BP (page 249)
Your bank will lend you \(4,000 for 45 days at a cost of \)50 interest. What is your effective rate of interest?
The effective interest rate is 10%.
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If a firm uses a just-in-time inventory system, what effect is that likely to have on the number and location of suppliers?
Summit Record Company is negotiating with two banks for a \(151,000 loan. Fidelity Bank requires a 28 percent compensating balance, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a 14 percent compensating balance, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 10 percent. Compensating balances will be subtracted from the \)151,000 in determining the available funds in part a.
c. Does your choice of banks change if the assumption in part b is correct?
Colter Steel has \(4,200,000 in assets.
Temporary current assets | \)1,000,000 |
Permanent current assets | \(2,000,000 |
Fixed assets | \)1,200,000 |
Total assets | \(4,200,000 |
Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are \)996,000. The tax rate is 40 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be? For a graphical example of perfectly matched plans, see Figure 6-5.
What is the difference between pledging accounts receivable and factoring accounts receivable?
McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of \(9,530. Its average daily sales are \)10,680, and it collects accounts in 32 days.
b. If the firm extends its average payment period from 27 days to 37 days (and all else remains the same), what is the firm鈥檚 new net credit position? Has it improved its cash flow?
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