QUESTION Explain what is meant by indirect costs of financial distress. Before we discuss what are the indirect costs associated with financial distress we need to know what actually financial distress is. Financial distress is one situation where company finds it difficult to pay off its creditors, where company borrows excessive funds to finance its […]
QUESTION Suppose First Main Street Bank, Second republic bank, and third fidelity bank all have excess reserves. The required ratio is 25%. The Federal Reserve buys a government bond worth $900,000 from Brian, a client of First Main Street Bank. He deposits the money in his checking account at First Main Str¦ Going in order […]
QUESTION Blanchford Enterprises is considering a project that has the following cash flow data. What is the projects payback? Note that a projects projected IRR can be negative in which case it will be rejected.Cash flows:Year 0: -$9651:$4252:$3853:$3454:$3055:$265 Payback period means the number of years required before you earn your initial outflow (i.e. when it […]
QUESTION Bunyan Lumber, LLC Closing Case: When should the company harvest the forest?Bunyan Lumber, LLC Closing Case: When should the company harvest the forest?Bunyan Lumber, LLC, harvests timber and delivers logs to timber mills for sale. The company was founded 70 years ago by Pete Bunyan. The current CEO¦ I cannot give you a direct […]
QUESTION Juan invested $25,000 in a mutual fund 6 yr ago. Today his investment is worth $45,019. Find the effective annual rate of return on his investment over the 6-yr period. (Round your answer to two decimal places.) ______________The Blakes have decided to start a monthly savings program in order to pro¦ Juan invested $25,000 […]
QUESTION Based on the corporate valuation model, the value of a companys opeations is 900 million its balance sheet shows 70 million in accounts receivable 50 million in inventory, 30 million in short term investments that are unrelated to operations, 20 million in accounts payable, 110 million in notes pa¦ Based on the corporate valuation […]
QUESTION DFB, Inc.,expects earnings this year of $5 per share, and it plans to pay a $3 dividend toshareholders. DFB will retain $2 per share of its earnings to reinvest in new projects thathave an expected return of 15% per year. Suppose DFB will maintain the same dividendpayout rate, retention rate, and re¦ DFB, Inc.,expects […]
QUESTION ABC Company was founded in 20X1 and had the following taxable income through 20X6:20X120X220X320X420X520X6$2.5M$8.5M$7.8M-$17.6M$12.3M$16.4MCompute the corporate income tax or tax refund ineach year, assuming the graduated tax rates listed below.At leastBut less thanTax Rate (%)Tax Calculation0.0050¦ 20Ã1 -2500000 =113900 0.34(2500000-335000) = 850000 20Ã2 -8500000 =113900 0.34(8500000-335000) = 2890000 20Ã3 -7800000 =113900 0.34(7800000-335000) = 2652000 […]
QUESTION 5. Executive Cheese has issued debt with a market value of $100 million and hasoutstanding 15 million shares with a market price of $10 a share. It now announcesthat it intends to issue a further $60 million of debt and to use the proceeds to buyback common stock. Debtholders, seeing the extra risk,¦ Liabilities […]
QUESTION A. Assuming a constant rate for purchases, production, and sales throughout the year, what are Casa de Disenos existing operating cycle (OC), cash conversion cycle (CCC), and resource investment need? If Lean can optimize Casa de Disenos operations according to industry standards, what will Casa de Disenos operating (OC), cash conversion cycle (CCC), and […]
