week 1 questions fin504.docx - The Role of Managerial...

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The Role of Managerial Finance: P1-1; P1-3; P1-4; P1-5P1–1Liability comparisonsMerideth Harper has invested $25,000 in Southwest Devel-opmentCompany. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain thenature of payments, if any, by Merideth in each of the following situations.a. Southwest Development Company is a sole proprietorship owned by Ms. Harper.b. Southwest Development Company is a 50–50 partnership of Merideth Harper and Christopher Black.c. Southwest Development Company is a corporation.P1–3Cash flowsIt is typical for Jane to plan, monitor, and assess her financial position using cash flowsover a given period, typically a month. Jane has a savings account, and her bank loans money at 6% peryear while it offers short-term investment rates of 5%. Jane’s cash flows during August were as follows:a. Determine Jane’s total cash inflows and cash outflows.b. Determine the net cash flow for the month of August.c. If there is a shortage, what are a few options open to Jane?d. If there is a surplus, what would be a prudent strategy for her to follow?
P1–4Marginal cost–benefit analysis and the goal of the firmKen Allen, capital budgeting analyst forBally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believesthat replacing the robotics used on the heavy truck gear line will produce total benefits of $560,000 (intoday’s dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also intoday’s dollars) over that same period. An initial cash investment of $220,000 would be required to

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Term
Spring
Professor
ProfessorWhite

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