Suppose that the rate of inflation accelerates from 5 to 10 percent per year. Would firms cash

Question:

Suppose that the rate of inflation accelerates from 5 to 10 percent per year. Would firms’ cash balances go up or down relative to sales? Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

See More Books

Question Posted: Jun 08, 2011 07:01 AM

See More Questions

Suppose that the rate of interest increases from 4% to 8% per year. Would firms' cash balances go up or down relative to sales? Explain.
Suppose that the rate at which a nuclear power plant produces radioactive waste is proportional to the number of years it has been operating, according to f (t)500t (in pounds per year). suppose also...
Suppose that the rate of job separation is 2% and the job-finding rate is 18%. a. What is the natural rate of unemployment? b. If the job-finding rate doubles, what is the new natural rate of...
Shock Electronics sells portable heaters for $35 per unit, and the variable cost to produce them is $22. Mr. Amps estimates that the fixed costs are $97,500. a. Compute the break-even point in units....
Does a viewer see a single color or a spectrum of colors coming from a single faraway drop?
Caroline is at a stores checkout counter. Shed like to pay for her purchase using either her credit card or her debit card, but preferably her credit card. However, she is not sure whether the store...
Under what conditions would a digital camera manufacturer adopt a skimming price approach for a new product? A penetration approach?
A bond trader purchased each of the following bonds at a yield to maturity of 8%. Immediately after she purchased the bonds, interest rates fell to 7%. What is the percentage change in the price of...
Ethical issues A. seldom involve legal issues. B.involve questions of right and wrong. C. are always clearly defined. D. often resolve themselves.
1:- As a result of MEXIT, Telford Engineering had lost 30% of its pre-MEXIT export sales to CETA customers, due to increased trade and tariff barriers with CETA. (See P/L account before MEXIT in the...
A firm maintains a separate account for cash disbursements. Total disbursements are $100,000 per month, spread evenly over the month. Administrative and transaction costs of transferring cash to the...
Suppose that interest rates double. a. What, according to the Baumol model, would happen to the firms average cash balances? b. Recalculate the gain from operating the lock-box system described in...
To become familiar with Aristotelian-Personalist Ethics based in human dignity and search for human flourishing
Absorption linewidth for an absorbing atomic transition. Consider the curves of power transmission T(w) = exp[-2am(w)L] through an atomic medium with a lorentzian resonant transition, plotted versus...
EXAMPLE 05.04 Z Write the force and the couple in the vector form (with rectangular/Cartesian components). Use C = 180 N-m and P = 500 N O INDIVIDUAL Submission (IS12) D x 400 mm B C 300 mm A 400 mm...
1.XYZ Corporation budgets factory overhead cost of P500,000 for the coming year. Compute for the overhead cost applied to the job. The following data are available: Budgeted annual overhead for...
OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system. Activity Materials Assembling Packaging Est. Indirect Activity Costs $65,000 $242,000 $90,000...
3. Solve Example 3.7 (Bergman, Lavine, Incropera, and DeWitt, 6th Ed., pp. 129-132, or 7th Ed., pp. 145-149, or 8th Ed., pp. 134-138), but use the finite difference method. T T = 30C Insulation-...
Which is the odd one out? The risk-management cycle includes the following stages: a. identification b. assessment c. migration d. management e. review
On March 31, 2018, Gardner Corporation received authorization to issue $30,000 of 9 percent, 30-year bonds payable. The bonds pay interest on March 31 and September 30. The entire issue was dated...
Look up the Programme for International Student Assessment (PISA) data base on international student assessment at http://pisa2006.acer.edu.au. Look up scores for reading, math, and science at the...
Define the following terms: a. Cost of debt b. Cost of equity c. After-tax WACC d. Equity beta e. Asset beta f. Pure-play comparable g. Certainty equivalent
Many investment projects are exposed to diversifiable risks. What does diversifiable mean in this context? How should diversifiable risks be accounted for in project valuation? Should they be ignored...
John Barleycorn estimates his firms after-tax WACC at only 8%. Nevertheless he sets a 15% companywide discount rate to offset the optimistic biases of project sponsors and to impose discipline on the...
Maddox Resources has credit sales of $ 1 8 0 , 0 0 0 yearly with credit terms of net 3 0 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its...
Selk Steel Co., which began operations on January 4, 2017, had the following subsequent transactions and events in its long-term investments. 2017 Jan. 5 Selk purchased 50,000 shares (25% of total)...
Equipment with a book value of $84,000 and an original cost of $166,000 was sold at a loss of $36,000. Paid $100,000 cash for a new truck. Sold land costing $330,000 for $415,000 cash, yielding a...

Suppose that the rate of inflation accelerates from 5 to 10 percent per year. Would firms cash

Question:

Step by Step Answer:

With an increase in inflation the rate of interest also increases whic...View the full answer

Principles of Corporate Finance

Students also viewed these Corporate Finance questions