Monthly interest = Rate per day Amount of loan Days in month

Another type of loan is an add-on interest loan. Here interest that is calculated and added to the funds received to determine the face amount of an installment loan. The approximate annual rate of an add-on loan is calculated as follows:

Costly trade credit can be very expensive, so often a firm will choose to borrow from a bank and pay trade discounts rather than paying after the discount period. Firms will choose the lowest-cost source.

Quantitative Problem: Adams Manufacturing Inc. buys $10.8 million of materials (net of discounts) on terms of 2/10, net 60; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. If Adams decides to forgo discounts, how much additional credit could it obtain? Round your answer to the nearest cent. Do not round your intermediate calculations. Use 365 day in a year. $

What would be the nominal and effective cost of such a credit? Round your answer to 2 decimal places. Do not round intermediate calculations. Use 365 day in a year. Nominal cost: % Effective cost: %

If the company could receive the funds from a bank at a rate of 7.6%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Round your answer to 2 decimal places. Do not round intermediate calculations. %

Quantitative Problem: Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle. Winston's 2013 sales (all on credit) were $144,000 and its cost of goods sold was 75% of sales. It turned over its inventory 8.85 times during the year. Its receivables balance at the end of the year was $13,141.5 and its payables balance at the end of the year was $7,413.93. Using this information calculate the firm's cash conversion cycle. Round your answer to the nearest whole. Round the days amounts in your intermediate calculations to the nearest whole day. Do not round other intermediate calculations. days

Quantitative Problem 1: Beasley Industries' sales are expected to increase from $4 million in 2013 to $5 million in 2014, or by 25%. Its assets totaled $2 million at the end of 2013. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2013, current liabilities are $730,000, consisting of $170,000 of accounts payable, $450,000 of notes payable, and $110,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and its dividend payout ratio is 50%. Using the AFN equation, forecast the additional funds Beasley will need for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations. $

The AFN equation assumes that ratios remain constant. However, firms are not always operating at full capacity so adjustments need to be made to the existing asset forecast. Excess capacity adjustments are changes made to the existing asset forecast because the firm is not operating at full capacity. For example, a firm may not be at full capacity with respect to its fixed assets. First, the firm's management must find out the firm's full capacity sales as follows:

Next, management would calculate the firm's target fixed assets ratio as follows:

Finally, management would use the target fixed assets ratio with the projected sales to calculate the firm's required level of fixed assets as follows:

Required level of fixed assets = (Target fixed assets/Sales) Projected sales

Quantitative Problem 2: Mitchell Manufacturing Company has $1,800,000,000 in sales and $320,000,000 in fixed assets. Currently, the company's fixed assets are operating at 70% of capacity.

1. What level of sales could Mitchell have obtained if it had been operating at full capacity? Round your answer to the nearest dollar. Do not round intermediate calculations. $
2. What is Mitchell's Target fixed assets/Sales ratio? Round your answer to two decimal places. Do not round intermediate calculations.%
3. IfMitchell'ssalesincreaseby50%,howlargeofanincreaseinfixedassetswillthecompanyneedtomeetitsTargetfixedassets/Salesratio?Roundyouranswertothenearestdollar.Donotroundintermediatecalculations.$

Quantitative Problem: At the end of last year, Edwin Inc. reported the following income statement (in millions of dollars):

Sales	$4,170
Operating costs excluding depreciation	3,011
EBITDA	$1,159
Depreciation	315
EBIT	$844
Interest	160
EBT	$684
Taxes (40%)	274
Net income	$410

Looking ahead to the following year, the company's CFO has assembled this information:

• Year-end sales are expected to be 5% higher than $4.17 billion in sales generated last year.
• Year-end operating costs, including depreciation, are expected to increase at the same rates as sales.
• Interest costs are expected to remain unchanged.
• The tax rate is expected to remain at 40%.

On the basis of this information, what will be the forecast for Edwin's year-end net income? Round your answer to the nearest whole million. Do not round intermediate calculations. Enter all values as positive numbers.

	(in millions of dollars)
Sales	$
Operating costs including depreciation
EBITDA	$
Depreciation
EBIT	$
Interest
EBT	$
Taxes
Net income	$

Quantitative Problem: Jasper Jewelry has $160 million in sales. The company expects that its sales will increase 4% this year. Jasper's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. On the basis of recent history, the estimated relationship between inventories and sales (in millions of dollars) is as follows:

Inventories = $9 + 0.09(Sales)

Given the estimated sales forecast and the estimated relationship between inventories and sales, what is your forecast of the company's year-end inventory level? Round your answer to two decimal places. Do not round intermediate calculations. $ million