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
#1. Quesiton Page 1
Solution page 2
#2. Quesetion&Solution page 3
#3. Question Page 4
Solution Page 5
Solution is picture format, so might take a while to load in.
1. (40 points) The following is the December 31, 2010 balance sheet for the E
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. (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
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
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) 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
(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.
(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.
(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
(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
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
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
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 $
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