Cost of Capital Problem

Current Balance Sheet Assets $100 Debt $10 Equity $90 Debt/Assets After-Tax Cost of Debt Cost of Equity Cost of Capital 0% 8% 12% ? 10% 8% 12% ? 20% 8% 12% ? 30% 8% 13% ? 40% 9% 14% ? 50% 10% 15% ? 60% 12% 16% ? What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the above information? cost of capita (k) = (weight) (cost of dept) + (weight) (cost of equity) k = (0) .08 + (0) .12 = 0 IS THIS CORRECT Construct a pro forma balance sheet that indicated the firms optimal capital structure. Compare this balance sheet with the firm's current balance sheet. What course of action should the fi... click for more

cost of capital

Given the following schedules: Debt/Assets Cost of Debt Cost of Equity Cost of Capital 0% 7% 14% 10 7 14 20 7 14 30 8 14 40 8 16 50 10 18 60 10 20 a. What is firm's cost of capital at the various combinations of debt and equity? b. What is the firm's optimal capital structure? Construct a balance sheet showing that combination of debt and equity financing.

EOQ

A firm annually sells 7,890 units. The cost of placing an order is $100 and the carrying costs are $2 a unit. What is the EOQ, the duration of the EOQ, and how many orders are placed annually? If the safety stock is 100 units, what are the maximum and average levels of inventory?

Planning: Forecasting and Budgeting

Given the following information, complete the cash budget: a. Collections occur one month after the sale b. January's credit sales were $80,000 c. The firm has a certificate of deposit for $40,000 that matures in April e. The monthly mortgage payment is $25,000 f. Monthly depreciation is $20,000 g. Property tax of $35,000 is due in February February March April Sales $150,000 $200,000 $250,000 Cash sales 30,000 20,000 60,000 Collections Other receipts Total cash receipts Salaries Other disbursements Total cash disburesments Net change during the month Beginning cash... click for more

Cash Management

Simpson’s Scuba Inc. is a manufacturer and retailer of scuba equipment. Currently, the firm has no coordinated cash-management system, and the firm’s management has decided to focus on ways to improve the cash collection process. A proposal from the First California Bank aimed at speeding up cash collections is being examined by several of Simpson’s corporate executives. The firm’s current billing procedure is centralized and requires that all checks be mailed to the Malibu headquarters for processing and eventual deposit. Accordingly, it takes an average of 5 days for customers’ checks to arrive at headquarters for processing. Once in Malibu, it takes another 2 days to process the check... click for more