The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %. Calculate the firm's initial net working capital. Calculate the firm's initial ratio of current assets to total assets.
The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %. Calculate the firm's initial net working capital. Calculate the firm's initial ratio of current assets to total assets.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %.
- Calculate the firm's initial net working capital.
- Calculate the firm's initial ratio of current assets to total assets.
- Critically evaluate THREE (3) advantages of commercial paper that usually used by the largest and most credit-worthy companies.
Transcribed Image Text:Flum Packages, Inc.
Liabilities & Equity
Current Liabilities
Long-term debt
Equity
Total
Assets
Current assets
$10,000
$ 5,000
12,000
13,000
$30,000
Fixed assets
20,000
Total
$30,000
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