The relationship of firm’s accounting–based profitability and its cash cycle Introduction: Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

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Chapter 18.2, Problem 18.2CCQ

Summary Introduction

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

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Moose Enterprises finds it is necessary to determine its marginal cost of capital. Moose’s current capital structure calls for 50 percent debt, 30 percent preferred stock, and 20 percent common equity. Initially, common equity will be in the form of retained earnings (Ke) and then new common stock (Kn). The costs of the various sources of financing are as follows: debt, 9.6 percent; preferred stock, 9 percent; retained earnings, 10 percent; and new common stock, 11.2 percent. a. What is the initial weighted average cost of capital? (Include debt, preferred stock, and common equity in the form of retained earnings, Ke.) b. If the firm has $18 million in retained earnings, at what size capital structure will the firm run out of retained earnings? c. What will the marginal cost of capital be immediately after that point? (Equity will remain at 20 percent of the capital structure, but will all be in the form of new common stock, Kn.) d. The 9.6 percent cost of debt referred to earlier…

7. Berkeley Farms wants to determine the minimum cost of capital point for the firm. Assume it is considering the following financial plans: Cost (aftertax) Weights Plan A Debt .................................. 4.0% 30% Preferred stock .................. 8.0 15 Common equity ................. 12.0 55 Plan B Debt .................................. 4.5% 40% Preferred stock .................. 8.5 15 Common equity ................. 13.0 45 Plan C Debt .................................. 5.0% 45% Preferred stock .................. 18.7 15 Common equity ................. 12.8 40 Plan D Debt .................................. 12.0% 50% Preferred stock .................. 19.2 15 Common equity ................. 14.5 35 a. Which of the four plans has the lowest weighted average cost of capital? Use the Kd (cost of debt) = Y(1 - T), Kp (Cost of preferred stock) = Dp/Pp - F, Ke = D1/P0 + g formulas or I will not understand.

Need use the Kd (cost of debt) = Y(1 - T), Kp (Cost of preferred stock) = Dp/Pp - F, Ke = D1/P0 + g formulas or I will not understand. Delta Corporation has the following capital structure: Cost Weighted (after-tax) Weights Cost Debt 8.1% 35% 2.84% Preferred stock (Kp) 9.6 5 .48 Common equity (Ke) (retained earnings) 10.1 60 6.06 Weighted average cost of capital (Ka) 9.38% a. If the firm has $18…

Answer 2

Question

Chapter 18.2, Problem 18.2CCQ

Summary Introduction

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

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Answer 3

Question

Chapter 18.2, Problem 18.2CCQ

Summary Introduction

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

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Answer 4

Question

Chapter 18.2, Problem 18.2CCQ

Summary Introduction

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

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Answer 5

Chapter 18.2, Problem 18.2CCQ

Summary Introduction

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

Answer 6

Chapter 18.2, Problem 18.2CCQ

Summary Introduction

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

Answer 7

Chapter 18.2, Problem 18.2CCQ

Summary Introduction

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

Answer 8

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Answer 11

Ch. 18.1 - What is the difference between net working capital...Ch. 18.1 - Prob. 18.1BCQ Ch. 18.1 - List five potential sources of cash.Ch. 18.1 - Prob. 18.1DCQ Ch. 18.2 - Prob. 18.2ACQ Ch. 18.2 - Prob. 18.2BCQ Ch. 18.2 - Prob. 18.2CCQ Ch. 18.3 - What keeps the real world from being an ideal one...Ch. 18.3 - What considerations determine the optimal size of...Ch. 18.3 - Prob. 18.3CCQ

The relationship of firm’s accounting–based profitability and its cash cycle Introduction: Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle Introduction: Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.

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Chapter 18 Solutions

To discuss: The relationship of firm’s accounting–based profitability and its cash cycle

Introduction:

Cash cycle is also termed as cash conversion cycle, which measures the time taken to convert the cash into stocks, accounts payable through sales and accounts receivables.