Chap22 Pbms MBF12e

# Chap22 Pbms MBF12e - Problem 22.1 Indian Motorcycles(A...

This preview shows pages 1–4. Sign up to view the full content.

Problem 22.1 Indian Motorcycles (A) Assumptions Values Value of shipment \$1,000,000 Credit terms, days 180 Bankers' acceptance fee 1.750% Indian Motorcycles' WACC, per annum 10.000% All-in-cost of Bankers' Acceptance Face amount of bankers' acceptance \$1,000,000.00 Less acceptance fee for 6-month maturity (8,750.00) ( face amount x acceptance fee x (term/360)) Amount received by Indian \$991,250.00 Opportunity cost of capital @ Indian's WACC \$49,562.50 (amount received x WACC x 180/360) Annualized percentage all-in-cost (AIC) 11.765% (acceptance fee +opportunity cost) / (amount received) x (360/180) Indian Motorcycles exports large-engine motorcycles (greater than 700cc) to Australia and invoices its customers in U.S. dollars. Sydney Wholesale Imports has purchased \$3,000,000 of merchandise from Indian Motorcycles, with payment due in 6 months. The payment will be made with a bankers’ acceptance issued by Charter Bank of Sydney at a fee of 1.75% per annum. Indian Motorcycles has a weighted average cost of capital of 10%. If Indian holds this acceptance to maturity. What is its annualized percentage all-in-cost?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Problem 22.2 Indian Motorcycles (B) Assumptions Values Value of shipment \$1,000,000 Credit terms, days 180 Bankers' acceptance fee 1.750% Indians' WACC, per annum 10.000% Discount rate on sale of acceptance, per annum 6.000% All-in-Cost of Bankers' Acceptance Face amount of bankers' acceptance \$1,000,000.00 Less acceptance fee for 6-month maturity (8,750.00) Less discount on sale of acceptance (30,000.00) Amount received by Indian \$961,250.00 Annualized percentage all-in-cost (AIC) 8.062% (acceptance fee + discount) / (amount received) x (360/180) Assuming the facts in problem 1, Bank of America is now willing to buy Indian Motorcycles’s bankers’ acceptance for a discount of 6% per annum. What would be Indian’s annualized percentage all-in-cost of financing its \$1,000,000 Australian receivable?
Problem 22.3 Takagi Toyota a. What is the annualized percentage all-in-cost to Takagi Toyota? b. What are Takagi’s net cash proceeds, including the cash down payment? Assumptions Values Face amount of sale (first payment of 5) \$200,000 Down payment, 20% of payment \$40,000 Period for financing, days 180 Trade acceptance fee 2.000% Discount rate on sale of acceptance, per annum 3.000% All-in-Cost of Trade Acceptance Face amount of sale \$200,000.00 Less cash down-payment (40,000.00) Amount for financing \$160,000.00 Less trade acceptance fee (amount financed x acceptance fee x (days/360) ) (1,600.00) Less discount for the period (amount financed x discount rate x (days/360)) (2,400.00) Proceeds to Takagi Toyota \$156,000.00 a. Annualized percentage all-in-cost (AIC) 5.128% (acceptance fee + discount) / (amount received) x (360/180) b. Net cash proceeds to Takagi Toyota Down payment \$40,000 Proceeds of acceptance 156,000.00 Total cash proceeds \$196,000.00 Takagi Toyota buys its cars from Toyota Motors-USA, and sells them to U.S. customers. One of

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 03/10/2012 for the course ACCOUNTING 5450 taught by Professor Brown during the Spring '12 term at Colorado Technical University.

### Page1 / 11

Chap22 Pbms MBF12e - Problem 22.1 Indian Motorcycles(A...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online