Business Finance Help for College and University Students

Accounts Receivable - Brenda Smith, Inc. had a gross profit margin

Brenda Smith, Inc. had a gross profit margin (gross profits à· sales) of 25 percent and sales of $9.75 million last year. Seventy-five percent of the firm's sales are on credit and the remainder are cash sales. Smith's current assets equal $1,550,000, its current liabilities equal $300,000, and it has $150,000 in cash plus marke ...continues

Expected rate of return

Kelly B. Stites, Inc., is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measured by the standard deviation) and return? Security A Security B Probability Return Probability Return .20 -2% .10 5% .50 ...continues

Pref Stock valuation

Green's preferred stock is selling for $35 in the market and pays a $4 annual dividend. a. What is the expected rate of return on the stock? b. If an investor's required rate of return is 10 percent, what is the value of the stock for that investor? c. Should the investor acquire the stock?

Common stock valuation

The common stock of KPD paid $1 in dividends last year. Dividends are expected to grow at an 8 percent annual rate for an indefinite number of years. a. If KPD's current market price is $25, what is the stock's expected rate of return? b. If your required rate of return is 11 percent, what is the value of the stock for you ...continues

Project Analysis

The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The purchase of this machine will result in an increase in earnings before interest and taxes of $70,000 per year. The machine has a purchase price of $250,000, and it would cost an additional $10,000 after tax to install this machine proper ...continues

Discount rate on purchase

As a consultant to GBH Skiwear, you have been asked to compute the appropriate discount rate to use to evaluate the purchase of a new warehouse facility. You have determined the market value of the firm's capital structure as follows: Source of Capital Market Value Bonds $500,000 Preferred stock $100,0 ...continues

Leverage Analysis

You are supplied with the following analytical income statement for your firm. It reflects last year's operations. (see attachment in Word) a. At this level of output, what is the degree of operating leverage? b. What is the degree of financial leverage? c. What is the degree of combined leverage? d. If sales should ...continues

Long-Term residual Dividend Policy

Wells Manufacturing, Inc. has projected its investment opportunities over a 5-year planning horizon. The cost of each year's investment and the amount of internal funds available for reinvestment for that year follow. The firm's debt-equity mix is 40 percent debt and 60 percent equity. There are currently 125,000 shares of commo ...continues

Line of credit- Cost of short-term bank loan

Lola's Ice Cream recently arranged for a line of credit with the Longhorn State Bank of Dallas. The terms of the agreement called for a $100,000 maximum loan with interest set at 2.0 percent over prime. In addition, Lola's must maintain a 15 percent compensating balance in its demand deposit throughout the year. The prime rate i ...continues

This material suggests approach to compute cost of promissory note

ABC company draws a promissory note with a face value of $ 100,000. It is issued on 1st july and matures on 31st July a) What is the interest rate if drawer receives $99,023? b) How much is obtained by drawer if the interest rate is 12% p.a.? Solution