Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 15, Problem 15.9P

a.

Summary Introduction

To determine: The bad debts in dollars currently and under the proposed change.

b.

Summary Introduction

To determine: The cost of the marginal bad debt.

c.

Summary Introduction

To recommend: The additional profit contribution from increased sales, if the proposed change saves $3,500 and causes no change in the average investment in accounts receivable.

d.

Summary Introduction

To recommend: The all changes in costs and benefits, would you recommend the proposed change.

e.

Summary Introduction

To discuss: The part C and D

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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?
Scenario three: If a portfolio has a positive investment in every asset, can the expected return on a portfolio be greater than that of every asset in the portfolio? Can it be less than that of every asset in the portfolio? If you answer yes to one of both of these questions, explain and give an example for your answer(s). Please Provide a Reference

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Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)

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