Using the bond yield spread matrix above, calculate the fair yield on a 5-year noncallable corporate bond that is rated “B” by S&P, given also that the yield on 5-year Treasuries is 4.44%. a. 4.15% b. 6.15% c. 8.59% d. 10.59% ANSWER C
Date: September 19th, 2020
A company’s cash sales for May are $300,000, its accounts receivable payments for May are $200,000, its beginning cash for May is $50,000, and there are no other cash inflows for May. Its accounts payable payments for May are $250,000, its wages and salaries for May are $100,000, its interest payments for May are $50,000, […]
Date: September 19th, 2020
When a company has excess funds, it has four options. Describe these options. What is the simplest thing to do with excess cash? What will be an ideal response? ANSWER Answer: First, you can put the excess fund in a savings account or invest them in marketable securities. Second, you can repay lenders […]
Date: September 19th, 2020
A company’s cash sales in January are $200,000, its accounts receivable payments for January are $100,000, its beginning cash for January is $50,000, and there are no other cash inflows for January. Its accounts payable payments for January are $200,000 and its wages and salaries for January are $100,000, and its interest payments for January […]
Date: September 19th, 2020
Describe some uses of excess cash. What will be an ideal response? ANSWER Answer: If the excess cash is not needed to cover future cash deficits, then it can be used to pay down, or “retire” current debt. Another option is to give the cash back to the owners via dividend payments. Excess […]
Date: September 19th, 2020
The following information is for Auxiliary, Inc. for the month of May: cash sales of $200,000; accounts receivable payments of $200,000; accounts payable payments of $200,000; wages and salaries of $100,000; and, interest payments of $50,000. There are no other cash inflows or outflows for the month of May and its beginning monthly cash balance […]
Date: September 19th, 2020
The higher the degree of financial leverage (DFL), the greater the leverage a given financing plan has, and the steeper its slope when plotted on EBIT-EPS axes. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Benson Incorporated’s cash sales in January are $300,000, its accounts receivable payments for January are $150,000, its beginning cash for January is $75,000, and there are no other cash inflows for January. Its accounts payable payments for January are $200,000 and its wages and salaries for January are $200,000, and its interest payments for January […]
Date: September 19th, 2020
Simulations based on the Black-Scholes model indicate that, for all combinations of leverage (D/V) and firm risk , debt risk: a. increases as debt maturity increases. b. decreases as debt maturity increases. c. remains fairly constant as debt maturity increases. ANSWER A
Date: September 19th, 2020
A line of credit is a secured bank loan whereby the bank agrees to lend a company up to a specific amount of cash, at the discretion of the company. In other words, it is just a pre-arranged loan. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: A line […]
Date: September 19th, 2020
