In this scenario, Finance is facing a negative cash position. Currently the department is both issuing and retiring $6,000 of long-term debt. Use the slidersbelow to reassess the company's financing decisions and protect against an Emergency Loan.Task QuestionYou have invested $6,000 in plant improvementsand financed $6,000 Long-Term debt to pay for it.You have also elected to retire $6,000 of Long-Term Debt. Now, your closing cash position reads-$3,000.RetireLongTerm Debt $0IssueLongTerm Debt $0$3,600$6,000$10,000$10,000Closing Cash Position ($5,400)Hint SubmitTotal Raised Capital: $6,000Spence0Starting Cash PositionJanuary 1, 2019Cash FlowCash from OperatingCash from InvestingCash from Financing. Dividends Paid• Issue Stock. Retire Stock.Net Change in Cument Debt• Issue Long-Term Debt. Retire Long-Term DebtClosing Cash PositionDecember 31, 2019Total Spent Capital: $6,000$3,431($6,431)$0SO$0$0$0$0$6,000($6,000)($3,000)KClick to Expand✓Incorrect!The $6,000 Long-Term Debt you initially issuedwas a solid financial decision to pay foroperations (plant improvements). Borrowing anymore, or less is avoiding the real issue - it isgenerally bad practice to borrow and pay-back atthe same time. Try something else.

Lets understand the basics. Management calculate and manager cash position so that to there is no…

Answered: In this scenario, Finance is facing a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Consider two local banks. Bank A has 100 loans outstanding, each for $1.3 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $130 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $☐ million. (Round to two decimal places.)
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Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Zeta is 14.6%, but he can’t recall how much Cute Camel originally invested in the project nor the project’s net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Zeta. They are: Year Cash Flow Year 1 $2,000,000 Year 2 $3,750,000 Year 3 $3,750,000 Year 4 $3,750,000 The CFO has asked you to compute Project Zeta’s initial investment using the information currently available to you. He has offered the following suggestions and observations: • A project’s IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outflows—when the cash flows are discounted using the project’s…
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Kate is considering expanding and bringing in several employees. To do this she will need a larger facility and to purchase more equipment. Which means additional financing. Answer this: look at the financial statements as if you were a banker considering her for a loan comment on your findings and use calculations to support your answer.
A linear programming computer package is needed. The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenue-producing investments together with annual rates of return are as follows. Type of Loan/Investment Automobile loans Furniture loans Other secured loans Signature loans Risk-free securities Annual Rate of Return (%) 7 $ $ $ $ $ 9 What is the projected total annual return? $ 10 11 The credit union will have $2,200,000 available for investment during the coming year. State laws and credit union policies impose the following restrictions on the composition of the loans and investments. 8 • Risk-free securities may not exceed 30% of the total funds available for investment. ● Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured,…
Consider two local banks. Bank A has 87 loans outstanding, each for $1.0 million, that it expects will be repaid today. Each loan has a 3% probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $87 million outstanding, which it also expects will be repaid today. It also has a 3% probability of not being repaid. Calculate the following: a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. a. The expected overall payoff of each bank. The expected overall payoff of Bank A is $ million. (Round to the nearest integer.)
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XYZ Corporation has annual cash demand of P3,000,000 for a fund set aside for operating expenses. The cost to transfer funds into this account is P500 each time. If cash was not placed into this fund, it would have earned 4% annually. Its current policy is to transfer P125,000 every 15 days. What is the increase /(decrease) in income if the Optimum Cash Balance model was applied to this account?
Aaron Heath is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Aaron expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows: Year of Operation Year 1 Cash Inflow Cash Outflow $13,100 Year 2 19,200 Year 3 Year 4 22,000 22,000 $ 8,700 11,700 12,800 12,800 In addition to these cash flows, Aaron expects to pay $20,800 for the equipment. He also expects to pay $3,600 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $1,500 salvage value and a four-year useful life. Aaron desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use…
ABC Corporation has annual cash demand of 3,000,000 for a fund set aside for operating expenses. The cost to transfer funds into this account is 500 each time. If cash was not placed into this fund, it would have earned 4% annually. Its current policy is to transfer 125,000 every 15 days. What is the increase/ decrease in income if the Optimum Cash Balance model was applied to this account?

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