Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
11th Edition
ISBN: 9780077861759
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 26, Problem 8QP
Calculating Payments The Thakor Corporation’s purchases from suppliers in a quarter are equal to 75 percent of the next quarter's
Here are the projected quarterly sales:
Sales for the first quarter of the following year are projected at $1,645. Calculate the company’s cash outlays by completing the following:
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The beginning cash balance is $18,000. Sales are forecasted at $860,000 of which 80% will be on account. Seventy percent of credit
sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at $475,000. Accounts Receivable
from previous accounting periods totaling $11,300 will be collected in the current year. The company is required to make a $14,000
loan payment and an annual interest payment on the last day of every year. The loan balance as of the beginning of the year is $95,000,
and the annual interest rate is 8%.
Compute the excess of available cash over cash disbursements.
Excess of available cash over cash disbursements
$
C. Exodus Corp. is analyzing the performance of its cash management. On the average,
the firm holds inventory 65 days, pays its suppliers in 35 days, and collects its
receivables in 15 days. The firm has a current annual outlay of P1,960,000 on operating
cycle investments. Exodus currently pays 10 percent for its negotiated financing.
(Assume a 360-day year.)
Calculate the following:
a. Cash conversion cycle
b. Operating cycle.
c. Daily expenditure and the firm's annual savings if the operating cycle is reduced
by 15 days.
Hurkin Manufacturing Company pays accounts payable on the tenth day after purchase. The average collection period is 30 days, and the average age of inventory is 40 days. The firm currently has annual sales of about $18 million and purchases of $14 million. The firm is considering a plan that would stretch its accounts payable by 20 days. If the firm pays 12% per year for its resource investment, what annual savings can it realize by this plan? Assume a 360- day year.
Chapter 26 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 26 - Prob. 1CQCh. 26 - Prob. 2CQCh. 26 - Prob. 3CQCh. 26 - Cost of Current Assets Grohl Manufacturing, Inc.,...Ch. 26 - Prob. 5CQCh. 26 - Shortage Costs What are the costs of shortages?...Ch. 26 - Prob. 7CQCh. 26 - Prob. 8CQCh. 26 - Prob. 9CQCh. 26 - Prob. 10CQ
Ch. 26 - Prob. 11CQCh. 26 - Prob. 12CQCh. 26 - Prob. 1QPCh. 26 - Cash Equation Blizzard Corp. has a book value of...Ch. 26 - Changes in the Operating Cycle Indicate the effect...Ch. 26 - Prob. 4QPCh. 26 - Calculating Cash Collections The Litzenberger...Ch. 26 - Prob. 6QPCh. 26 - Prob. 7QPCh. 26 - Calculating Payments The Thakor Corporations...Ch. 26 - Calculating Cash Collections The following is the...Ch. 26 - Prob. 10QPCh. 26 - Prob. 11QPCh. 26 - Prob. 12QPCh. 26 - Prob. 13QPCh. 26 - Prob. 14QPCh. 26 - Prob. 15QPCh. 26 - Prob. 1MCCh. 26 - Rework the cash budget and short-term financial...Ch. 26 - Rework the sales budget assuming an 11 percent...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Superstar Berhad reported sales of RM70,000 in May and RM80,000 in June. The forecast sales for July, August and September are RM90,000, RM100,000, and RM110,000, respectively. The beginning cash balance on July 1 is RM3,000 and the firm wishes to maintain a minimum cash balance of RM5,000 every month. The total long-term liabilities of the company is RM25,000. Given the following data, prepare a cash budget for the months of July, August and September. The firm makes 20% of sales for cash, 60% are collected in the next month, and the remaining 20% are collected in the second month following sale. The firm receives other income of RM 2,000 per month. The firm’s actual or expected purchases, all made for cash, are RM65,000, RM70,000, and RM85,000 for the months of July through September, respectively. Rent is RM5,500 per month. Wages and salaries are 10% of the previous month’s sales. The net income is RM30,000. Cash dividends is 20% of the net income and will be paid in August. The…arrow_forwardThe Martin Company expects its total sales in the first quarter of 2024 will be $200,000 . Martin estimates that , in each subsequent quarter , total sales will increase by 10 % of the sales in the immediately preceding quarter . Martin estimates that 60 % of each quarter's sales will be on account , and 40 % will be for cash . Of the amount on account , 75% will be collected in the same quarter the sale occurred , and 25 % will be collected in the following quarter . Assume Martin will have no accounts receivable at the beginning of 2024. The balance in the Accounts Receivable account at the end of the third quarter is expected to be: $42,000 $ 30,000 $36,300 $ 60,000 $108,900arrow_forwardSteber Packaging Inc. expects sales next year of $40 million. Of this total, 45 percent is expected to be for cash and the balance will be on credit, payable in 30 days. Operating expenses are expected to total $17 million. Accelerated depreciation is expected to total $12 million, although the company will only report $8 million of depreciation on its public financial reports. The marginal tax rate for Steber is 34 percent. Current assets now total $26 million and current liabilities total $14 million. Current assets are expected to increase to $29 million over the coming year. Current liabilities are expected to increase to $20 million. Compute the projected after-tax operating cash flow for Steber during the coming year. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. $ millionarrow_forward
- Your company forecasts that next year's sales will be $59.00 million, Cost of Goods Sold (COGS) will be 85% of sales, and the Days Payables Outstanding (DPO) ratio will be 22.19. What is the forecasted accounts payable for next year?arrow_forwardWilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecast sales figures: Actual November December Sales Credit sales $ 600,000 January 620,000 February March Cash sales One month after sale Two months after sale Total cash receipts Of the firm's sales, 50 percent are for cash and the remaining 50 percent are on credit. Of credit sales, 50 percent are paid in the month after sale and 50 percent are paid in the second month after the sale. Materials cost 30 percent of sales and are purchased and received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after they are received. Labor expense is 40 percent of sales and is paid for in the month of sales. Selling and administrative expense is 20 percent of sales and is paid in the month of sales. Overhead expense is $38,000 in cash per month. Forecast…arrow_forwardSteber Packaging Inc. expects sales next year of $42 million. Of this total, 40 percent is expected to be for cash and the balance will be on credit, payable in 30 days. Operating expenses are expected to total $22 million. Accelerated depreciation is expected to total $9 million, although the company will only report $5 million of depreciation on its public financial reports. The marginal tax rate for Steber is 34 percent. Current assets now total $26 million and current liabilities total $14 million. Current assets are expected to increase to $29 million over the coming year. Current liabilities are expected to increase to $17 million. Compute the projected after-tax operating cash flow for Steber during the coming year. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.arrow_forward
- The management of XYZ Co has annual credit sales of $20 million and accounts receivable of $4 million. Working capital is financed by an overdraft at 12% interest per year. Assume 365 days in a year. What is the annual finance cost saving if the management reduces the collection period to 60 days?arrow_forwardCalculating Payments Marshall plc's purchases from suppliers in a quarter are equal to 75 per cent of the next quarter's forecast sales. The payables period is 60 days. Wages, taxes and other expenses are 20 per cent of sales, and interest and dividends are £60 per quarter. No capital expenditures are planned. Here are the projected quarterly sales: Sales (£) Q1 750 Q2 920 Q3 Q4 890 790 Sales for the first quarter of the following year are projected at £970. Calculate the com- pany's cash outlays by completing the following: Payment of accounts Wages, taxes, other expenses Long-term financing expenses. (interest and dividends) Total Q1 Q2 Q3 Q4arrow_forwardAppalachian Registers, Inc. (ARI) has current sales of $50 million. Sales are expected to grow to $70 million next year. ARI currently has accounts receivable of $9 million, inventories of $15 million, and net fixed assets of $18 million. These assets are expected to grow at the same rate as sales over the next year. Accounts payable are expected to increase from their current level of $14 million to a new level of $18 million next year. ARI wants to increase its cash balance at the end of next year by $2 million over its current cash balances, which average $4 million. Earnings after taxes next year are forecasted to be $10 million. Next year, ARI plans to pay dividends of $2 million, up from $500,000 this year. ARI's marginal tax rate is 34 percent. How much external financing is required by ARI next year? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. $ millionarrow_forward
- Stratosphere Wireless is examining its cash conversion cycle. The company expects its cost of goods sold, which equals 60 percent of sales, to be $144,000 this year. Stratosphere normally turns over inventory 24 times per year, accounts receivable is turned over 12 times per year, and the accounts payable turnover is 45. Assume there are 360 days in a year. Calculate the cash conversion cycle. Round your answer to the nearest whole number. days Calculate the average balances in accounts receivable, accounts payable, and inventory. Round your answers to the nearest dollar. Accounts receivable: $ Accounts payable: $ Inventory: $arrow_forwardStratosphere Wireless is examining its cash conversion cycle. The company expects its cost of goods sold, which equals 60 percent of sales, to be $540,000 this year. Stratosphere normally turns over inventory 20 times per year, accounts receivable is turned over 18 times per year, and the accounts payable turnover is 36. Assume there are 360 days in a year. Calculate the cash conversion cycle. Round your answer to the nearest whole number. days Calculate the average balances in accounts receivable, accounts payable, and inventory. Round your answers to the nearest dollar. Accounts receivable: $ Accounts payable: $ Inventory: $ I got the last question wrong. I have attached an example to the correct solution. Is there an easier way?arrow_forwardThe firm PAR inc. forecasts monthly disbursements of $ 75,000 over the next year. The firm invests its cash in treasury bills at an annual rate of 30%. A treasury bill transaction costs the firm $ 150.a) What would be the optimal amount of treasury bills that the business must sell to minimize the total cost of cash on hand during the year? b) What would that total cost of cash be during the year?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
The management of receivables Introduction - ACCA Financial Management (FM); Author: OpenTuition;https://www.youtube.com/watch?v=tLmePnbC3ZQ;License: Standard YouTube License, CC-BY