Please help me with question 4-1. All Study Problems are available in MyLab Finance. The x icon indicates problems in Excelformat available in MyLab Finance.MyLab4-1. (Evaluating liquidity) Aylward Inc. currently has $2,145,000 in current assets and LO2$858,000 in current liabilities. The company's managers want to increase the firm'sinventory, which will be financed by a short-term note with the bank. What level ofinventories can the firm carry without its current ratio falling below 2.0?

Current Ratio=Current Liabilities/Current AssetsGiven:Current Assets = $2,145,000Current…

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Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 5MC: David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing....

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An employee at Azai Bank seeks to evaluate a transaction using the risk-adjusted return on capital (RAROC) model. The transaction entails extending a loan to an agro-based entity with the following details:- The risk-free rate of return is 7%- Loss given default (LGD) = 51%- Exposure at default (EAD) = ZMW 2.5 million- Probability of default (PD) = 40 basis points The bank's economic capital (EC) model assesses an EC charge for the firm, equivalent to 5% of EAD, amounting to ZMW 100,000. Assuming a RAROC hurdle rate of 15%, the transaction yields a net profit of ZMW 14,000 before other adjustments. Tasks:A. Calculate the bank’s risk-adjusted rate of return on the loan to the agricultural company. B. Additionally, consider the scenario where the bank could have extended a loan of the same amount, generating an identical net profit of ZMW 14,000 before adjustments to a pharmaceutical products manufacturing firm, with an EC of 2.5%. C. Determine which loan the bank should prioritize…
I need help answering A, B, and C, questions please in the pic.
A lending officer at C Bank has insisted that your firm improve the current ratio of 0.8 before the bank will consider a loan. Which of the following actions would INCREASE the ratio? Group of answer choices: Selling some of the existing inventory at cost Using cash to pay off current liabilities Borrowing long-term debt to pay off short-term bank loan Paying off long-term debt. Collecting some of the current accounts receivable
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Use the information presented in Northeastern Mutual Bank's balance sheet to answer the following questions. Suppose the owners of the bank borrow $100 to supplement their existing reserves. This would increase the reserves account and increase/decrease the capital/ debt/ deposit/ loans/ reserves account. This would also bring the leverage ratio from its initial value of 14/ 14.80/ 16.10/ 18.20 to a new value of 14/ 14.80/ 16.10/ 18.20 Which of the following do bankers take into account when determining how to allocate their assets? Check all that apply. The size of the monetary base The total value of liabilities The return on each asset
Jolly Banker is calculating the loan price for a $500,000 operating loan to Kelly business. If approved, this loan will be funded with 35% equity capital, and the remaining funds will come from the bank's debt capital. You have the following information about your bank’s outlays: Administrative costs 0.45% Cost of debt 7.00% Cost of equity 5.00% Probability of loss 0.55% Fees paid by the borrower 1.00% Calculate the weighted average cost of debt for this funding request. (Enter your answer in percentage. Round your answer to 2 decimal places)
(Liquidity analysis) When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,912,160,600 and current liabilities of $1,365,829,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal?
You are considering investing in Dakota's Security Services. You have been able to locate the following information on the firm: Total assets are $32.6 million, accounts receivable are $4.46 million, ACP is 25 days, net income is $4.83 million, and debt-to-equity is 1.3 times. All sales are on credit. Dakota's is considering loosening its credit policy such that ACP will increase to 30 days. The change is expected to increase credit sales by 6 percent. Any change in accounts receivable will be offset with a change in debt. No other balance sheet changes are expected. Dakota's profit margin will remain unchanged. How will this change in accounts receivable policy affect Dakota's net income, total asset turnover, equity multiplier, ROA, and ROE? Note: Do not round intermediate calculations. Enter your answer in millions of dollars. Round your answers to 2 decimal places. Use 365 days a year. Net income Total asset turnover Equity multiplier ROA ROE million times times % %
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Please answer Problem 11-3. Assess whether Aspero, Inc., meets the credit constraint for the loan from either or both banks. Show computations.
If a bank has a positive interest-sensitive gap, one of the possible management responses would be to: wait for the interest rates to rise or be shorten asset decrease interest-sensitive increase interest-sensitive The First National Bank of Trinidad reports a net interest margin of 5.83 percent. It has total interest revenues of $275 million and total interest expenses of $210 million. What will be the bank's earning assets total? $4,717 million $3,602 million $1,115 million $3,790 million The First National Bank of Trinidad reports a net interest margin of 5.83 percent. It has total interest revenues of $275 million and total interest expenses of $210 million. This bank has earnings assets of $1,115. Suppose this bank's interest revenues rise by 8 percent and its interest expenses and earnings assets rise by 10 percent what is this bank's new net interest margin? 83 percent 09 percent 59 percent 38 percent If Fifth National Bank's asset duration exceeds its…
(Liquidity analysis) When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,908,026,400 and current liabilities of $1,362,876,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal? a. What is the firm's current ratio? The firm's current ratio is (Round to…

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