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1. (40 points) The following is the December 31, 2010 balance sheet for the E
Homework Chapter 4
Student: _Huiting Lin_
1. (50 points) The following is the balance sheet for 2003 for Marbell Inc.
Sales for 2002 were $300,000. Sales for 2003 have been projected to increase by 20%. Assuming that Marbell
Inc. is operating below capaci
Chapter1- The Role of
Prepared by Patricia R. Robertson
Kennesaw State University
Introduction to Liquidity
Management of Working Capital
PartIII Corporate Cash Management
Marvs Womens Wear has the following schedule for aging of accounts receivable.
Age of Receivables, April 30, 2004
Month of Sales
Age of Account
1. (25 points) Complete the following balance sheet for the Range Company using the following
Debt to Assets = 60 percent
Quick Ratio = 1.1
Asset Turnover = 5x
Fixed Asset Turnover = 12.037x
Current Ratio = 2
Average Collection Period = 16.83
(40 points) The Nickelodeon Manufacturing Co. has a series of $1,000 par value bonds outstanding. Each
bond pays interest semi-annually and carries an annual coupon rate of 6%. Some bonds are due in 4
years, while others are due in 10 years. If the requir
1. (30 points) King, Inc., a successful Midwest firm, is considering opening a branch
office on the west coast. Under normal economic conditions, with a 45% probability
of occurring, King can expect to earn a net income of $70,000 per year. In a minireces
Good News Razor Co. issued bonds 10 years ago at $1,000 per bond. These bonds had a 40
year life when issued and the annual interest payment was then 12 percent. This return was
in line with the required returns by bondholders at that p
The Short-Line Railroad is considering a $100,000 investment in either of two companies.
The cash flows are as follows:
Using the p
(25 points) The Magic Pumpkin Limousine Company wants to purchase a car entertainment
system for one of its automobiles. The entertainment system vendor has offered to finance
the $2,000 purchase over one year in 12 installments, with a total of $200 i
Answer the following questions from your Text in Chapter 1: 2, 4, 6, 8, & 10.
Answer the following problems from your Text in Chapter 2: 7, 9, 17 & 23.
Jonas Brothers Cough Drops
Cost of goods
Selling and administrative
(50 points) Gray House is issuing bonds paying $95 annually that will mature
15 years from today. The bond is currently selling for $980.
a) Coupon rate
b) Current yield
c) Approximate yield to maturity
a) Coupon Rate=(95*100)/1000=9.5% p.a.
(50 points) Dixon Corporation is considering a public offering of common
stock. The firm will offer one million shares of common stock for sale. The
estimated selling price is $45 per share, with Dixon Corp. receiving $40.50
per share after the offerin
Answer the following problems from your Text in Chapter 3: 8, 17 & 23.
a. ROA = $100,000 / $1,000,000 = .10 = 10%
b. ROE = $100,000 / ($1,000,000 - $600,000) = .25 = 25%
c. Sales = 3 x $1,000,000 = $3,000,
Capone Child Care Centers, Inc., plans to borrow $250,000 for one year at 10 percent from
the Chicago Bank and Trust Company. There is a 20 percent compensating balance
requirement. Capone keeps minimum transaction balances of $18,000 i
Joan Lucky won the $80 million lottery. She is to receive $1 million a year for the next 50
years plus an additional lump sum payment of $30 million after 50 years. The discount rate
is 12 percent. What is the current value of her winni
Sanders & Co. pays a 12 percent coupon rate on debentures that are due in 20 years.
The current yield to maturity on bonds of similar risk is 10 percent. The bonds are currently
callable at $1,060. The theoretical value of the bonds will
Solutions to Problems: Chapter 7
Whether or not to take the cash discount.
Discount period (days)
Credit period (days)
Annualized discount rate:
(25 Points) You have an opportunity to buy a $1,000 bond that matures in
10 years. The bond pays $30 every six months. The current market interest
rate for similar bonds is 8%. What is the most you would be willing to pay
for this bond?
The bond pays $
(50 points) The law firm of Bushmaster, Cobra, and Asp is considering investing in a complete small
business computer system. The initial investment will be $50,000. The computer is in the 5-year MACRS
category, and the firm's tax rate is 34%. The comp
On January 8, the end of the first weekly pay period of the year, David Cruz
Company's payroll registered showed that the employees earned $27,760 of
office salaries and $70,240 of sales salaries. Other deductions are,
withholding taxes (federal) is $13,7