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2008-11-10_152302_Final_Exam

# 2008-11-10_152302_Final_Exam - PART 1 Post as Word or Excel...

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PART 1 – Post as Word or Excel attachment – Total 5 points MAKE SURE THAT YOU SHOW ALL YOUR WORK FOR PART 1 PROBLEMS Problems from the e-text: Principals of Managerial Finance, Brief Fourth Edition, by Lawrence J. Gitman Chapter 2 – 2 points P2-2, P2-16 Chapter 4 – 1 point P4-28 Chapter 11 – 1 point P11-4 Chapter 13 – 1 point P13-3 Problems: P2-2, P2-16, & P4-28 (Please see the attached excel sheet) P11-4) a) ( 29 CDs 000 , 21 48 . 10 \$ 98 . 13 \$ 500 , 73 \$ Q = - = b) Total operating costs = FC + (Q x VC) Total operating costs = \$73,500 + (21,000 x \$10.48) Total operating costs= \$293,580 c) 2,000 x 12 = 24,000 CDs per year. 2,000 records per month exceeds the operating breakeven by 3,000 records per year. Barry should go into the CD business. d) EBIT = (P x Q) - FC - (VC x Q) EBIT = (\$13.98 x 24,000) - \$73,500 - (\$10.48 x 24,000) EBIT = \$335,520 - \$73,500 - \$251,520 EBIT = \$10,500

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P13-3) a) AAI = 360 ÷ 6 times inventory = 60 days OC = AAI + ACP = 60 days + 45 days = 105 days CCC = OC - APP = 105 days - 30 days = 75 days Daily Financing = \$3,000,000 ÷ 360 = \$8,333 Resources needed = Daily financing x CCC = \$8,333 x 75 = \$624,975 b) OC = 55 days + 35 days = 90 days CCC = 90 days - 40 days = 50 days Resources needed = \$8,333 x 50 =\$416,650 c) Additional profit =(Daily expenditure x reduction in CCC) x financing rate = (\$8,333 x 25) x .13 = \$27,082 d) Reject the proposed techniques because costs (\$35,000) exceed savings (\$27,082).
PART 2 – 10 points – Use attached template – No deduction for wrong answer 1. A firm's balance sheet shows current assets of \$95, net fixed assets of \$250, long-term debt of \$40, and owners equity of \$200. What is the value of the firm's current liabilities if that is the only remaining balance sheet item? A) -\$ 50 B) \$ 50 C) \$105 D) \$145 E) \$545 2. Calculate net income using the following information: sales = \$135; cost of goods sold = \$40; selling, general and administrative expense = \$35; depreciation = \$20.00; interest expense = \$20.00; tax rate = 34%.

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