Posted: February 8th, 2016

Paul Stone can get 3/15, net 65 from his suppliers. Paul would like to delay paying the suppliers as long as possible because his cash account balance is very low, but his Dad, a famous financial expert, recommends that he borrow from his local bank at 10% and pay early to take advantage of the discount. Which of the following should Paul do? a. Pay within 15 days, borrowing from the bank, if necessary, to get the money. b. Pay on the 16th day c. Pay on the 65th day d. Send a hit man after his Dad If a firm takes actions that reduce its days sales outstanding (DSO), then, other things held constant, this will lengthen its cash conversion cycle (CCC). a. True b. False An increase in a current asset must be accompanied by a corresponding increase in a current liability. a. True b. False

4 questions

1) Thompson jet skis has operating cash flow of $218. Depreciation is $45 and interest paid is $35. A net total of $69 was paid on long-term debt. The firm spent $180 on fixed assests and increased net working capital by $38. What is the amount of the cash flow to stockholders?

2) The Adept Co. is analyzing a proposed project. The company expects to sell 2,500 units, give or take 10%. The expected variable cost per unit is $8 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 5% range. The depreciation expense is $4,000. The sale price is estimated at $16 a unit, give or take 2%.

What is the sales revenue?

3) The Can-Do Co. is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4%. The expected variable cost per unit is $7 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6% range. The depreciation expense is $30,000. The tax rate is 34%. The sale price is estimated at $14 a unit, give or take 5%.

What is the earnings before interest and taxes?

4) Winston Enterprises has a 15-year bond issue outstanding that pays a 9% coupon. The bond is currently priced at $894.60 and has a par value of $1,000. Interest is paid semiannually. What is the yield to maturity?