Solutions 27-14, 18 &amp; 28-12

# Solutions 27-14, 18 &amp; 28-12 - NPV (With the fixed...

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Chapter 27 Question 14 Input Area: Cash holding \$700,000 Cash needed per month \$360,000 Interest rate 6.5% Broker fee \$500 Output Area: Total cash \$4,320,000 C* \$257,801.35 The company should invest \$442,198.65 of its current cash holdings in marketable securities to bring the cash balance down to the optimal level. Over the rest of the year, sell securities 16.76 times.

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Chapter 27 Question 18 Input Area: Average # of payments per day 600 Average value of payment \$1,100 Variable lockbox fee \$0.35 Annual interest rate on MM securities 6.00% Fixed charges per year \$1,000 Reduction in collection time 2 # of days per year 365 Output: PV \$1,320,000 Daily interest rate 0.016% NPV \$4,652.17 The lockbox system should be accepted.
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Unformatted text preview: NPV (With the fixed charge) \$(12,014.50) The lockbox system should not be accepted. Chapter 28 Question 12 Input Area: Quantity sold 3,000 Cash price \$90.00 Days' credit 30 Credit price \$91.84 Discount period 10 Required return 1% d. Default rate 10% Output Area: a. Terms 2 / 10 net 30 b. Maximum accounts receivable \$270,000 c. Since the quantity sold does not change, variable cost is the same under either plan. d.-8% , the NPV will be negative. NPV \$(2,473,200) The breakeven credit price is \$101.00 , which implies the breakeven discount is 10.89% The NPV at this discount rate is \$0.00 No, because d - =...
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## This note was uploaded on 07/24/2009 for the course FIN FIN taught by Professor Robbani during the Spring '09 term at University of Maryland Baltimore.

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Solutions 27-14, 18 &amp; 28-12 - NPV (With the fixed...

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