MLX has annual sales of $320 million per year and has calculated the collection float to be 12 days If MLX is currently paying 9 35 on its line of credit, what amount of interest expense could be saved if the collection float is reduced by 3 days (Assume 365 days per year ) (2 marks) Ace Corp has sales for the second quarter of $2M, $3M and $5m per month All sales are on credit terms 2 10 net 40 Only a small proportion of customers (10 ) pay early enough to earn the 2 discount Most customers (70 ) pay in the month following purchase, with the remaining 20 paying in the second month following purchase It obtains 30 days credit from its suppliers, and purchases usually amount to 70 of the current month's sales Taxes ($0 75M) must be paid in the third month of the quarter Other expenses are (i) wages 15 of current month's sales (ii) interest on debt ($0 5M), and other expenses 10 of current month's sales Construct a cash budget for third month of the second quarter Does the firm have a cash surplus or deficit (7 marks) Haulsee Inc builds 800,000 golf carts a year and purchases the electronic motors for these carts for $370 each Ordering costs are $540, and Haulsee's inventory carrying costs average 14 of the inventory value What is the EOQ for Haulsee (2 marks) Alpha Products maintains a capital structure of 40 debt and 60 common equity To finance its capital budget for next year, the firm will sell $50 million of 11 debentures at par and finance the balance of its $125 million capital budget with retained earnings Next year Alpha expects net income to grow 7 to $140 million, and dividends also are expected to increase 7 to $1 40 per share and to continue growing at that rate for the foreseeable future The current market value of Alpha's stock is $30 If the firm has a marginal tax rate of 40 , what is its weighted cost of capital for the coming year (4 Marks)

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Posted on Oct 07, 2024

MLX has annual sales of $320 million per year and has calculated the collection float to be 12 days. If MLX is currently paying 9.35% on its line of credit, what amount of interest expense could be saved if the collection float is reduced by 3 days? (Assume 365 days per year.) (2 marks)

Ace Corp. has sales for the second quarter of $2M, $3M and $5m per month. All sales are on credit terms 2/10 net 40. Only a small proportion of customers (10%) pay early enough to earn the 2% discount. Most customers (70%) pay in the month following purchase, with the remaining 20% paying in the second month following purchase. It obtains 30 days credit from its suppliers, and purchases usually amount to 70 % of the current month's sales. Taxes ($0.75M) must be paid in the third month of the quarter. Other expenses are (i) wages @ 15% of current month's sales (ii) interest on debt ($0.5M), and other expenses @ 10% of current month's sales.

Haulsee Inc. builds 800,000 golf carts a year and purchases the electronic motors for these carts for $370 each. Ordering costs are $540, and Haulsee's inventory carrying costs average 14% of the inventory value. What is the EOQ for Haulsee? (2 marks)

Alpha Products maintains a capital structure of 40% debt and 60% common equity. To finance its capital budget for next year, the firm will sell $50 million of 11% debentures at par and finance the balance of its $125 million capital budget with retained earnings. Next year Alpha expects net income to grow 7% to $140 million, and dividends also are expected to increase 7% to $1.40 per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40%, what is its weighted cost of capital for the coming year? (4 Marks)