Managerial Finance
Chapter 26 problems:
2. Cash Equation – Blitz Corp. has a book value of equity of $17,010. Long-term debt is $8,400. Net working capital, other than cash, is $2,150. Fixed assets are $22,430 and current liabilities are $2,260. How much cash does the company have? What are current assets?
6. Calculating Cycles – Consider the following financial statement information for the Hop Corporation: Item Beginning Ending Inventory $16,284 $19,108 Accounts receivable 11,219 13,973 Accounts payable 13,960 16,676 Net sales $219,320 Cost of goods sold 168,420 Calculate the operating and cash cycles. How do you interpret your answer?
Chapter 27 problems:
2. Calculating Net Float – Each business day, on average, a company writes checks totaling $13,200 to pay its suppliers. The usual clearing time for the checks is four days. Meanwhile, the company is receiving payments from its customers each day, in the form of checks, totaling $23,800. The cash from the payments is available to the firm after two days. a. Calculate the company’s disbursement float, collection float, and net float. b. How would your answer to part (a) change if the collected funds were available in one day instead of two?
10. NPV and Reducing Float – No More Books Corporation has an agreement with Floyd Bank, whereby the bank handles $2.7 million in collections a day and requires a $425,000 compensating balance.
No More Books is contemplating canceling the agreement and dividing its Eastern region so that two other banks will handle its business. Banks A and B each will handle $1.35 million of collections a day and each requires a compensating balance of $230,000. No More Books’ financial management expects that collections will be accelerated by one day if the Eastern region is divided. Should the company proceed with the new system? What will be the annual net savings? Assume that the T-bill rate is 5 percent annually.
