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

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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?
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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?
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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
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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.

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

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