The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth. Introduction: Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

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Answer 1

Question

Chapter 15, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.

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Dillon Enterprises has the following capDillon Enterprises has the following capital structure. Debt ........................ 40% Common equity ....... 60 The after-tax cost of debt is 6 percent, and the cost of common equity (in the form of retained earnings) is 13 percent. What is the firm’s weighted average cost of capital? a. An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the after-tax cost of debt is 7 percent, and the cost of common equity (in the form of retained earnings) is 15 percent. Recalculate the firm’s weighted average cost of capital. b. Which plan is optimal in terms of minimizing the weighted average cost of capital?

Compute Ke and Kn under the following circumstances: a. D1= $5, P0=$70, g=8%, F=$7 b. D1=$0.22, P0=$28, g=7%, F=2.50 c. E1 (earnings at the end of period one) = $7, payout ratio equals 40 percent, P0= $30, g=6%, F=$2,20. Note: D1 is the earnings times the payout rate. d. D0 (dividend at the beginning of the first period) = $6, growth rate for dividends and earnings (g)=7%, P0=$60, F=$3. You will need to calculate D1 (the dividend after the first period).

Answer 2

Question

Chapter 15, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.

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Answer 3

Question

Chapter 15, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.

Expert Solution & Answer

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Answer 4

Question

Chapter 15, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.

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Answer 5

Chapter 15, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.

Answer 6

Chapter 15, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

Answer 7

Chapter 15, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

Answer 8

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

Answer 9

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

Answer 10

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.

Answer 11

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.

Answer 12

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Answer 13

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Answer 14

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Answer 15

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Solution Summary: The author calculates the free cash generated if the lockbox collection system is implemented, the frequency of the money generated, and the effect of growth.

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

To determine: The highest monthly charge for the lockbox system.

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Chapter 15 Solutions