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

Brenda Smith, Inc. had a gross profit margin (gross profits เท 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 marketable securities. a. If Smith's accounts receivable are $562,500, what is its average collection period? b. If Smith reduces its average collection period to 20 days, what will be its new level of accounts receivable? c. Smith's inventory turnover ratio is eight times. What is the level of Smith's inventories?

Subject:

Business

Topic:

Finance

Posting ID:

13711

OTA ID:

103060

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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 19% .30 7% .30 25% .40 12% .20 14%

Subject:

Business

Topic:

Finance

Posting ID:

13716

OTA ID:

101733

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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?

Subject:

Business

Topic:

Finance

Posting ID:

13717

OTA ID:

101733

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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? c. Should you make the investment?

Subject:

Business

Topic:

Finance

Posting ID:

13718

OTA ID:

101733

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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 properly. In addition, to operate this machine properly, inventory must be increased by $15,000. This machine has an expected life of 10 years, after which it will have no salvage value. Also, assume simplified straight-line depreciation and that this machine is being depreciated down to zero, a 34 percent marginal tax rate, and a required rate of return of 15 percent. a... click for more

Subject:

Business

Topic:

Finance

Posting ID:

13719

OTA ID:

101733

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