Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 3, Problem 3.16P

Accounts receivable management The table below shows that Blair Supply had an end-of-year accounts receivable balance of $300,000. The table also shows how much of the receivables balance originated in each of the previous 6 months. The company had annual sales of $2.4 million, and it normally extends 30-day credit terms to its customers.

Month of origin Accounts receivable
July $3,875
August 2,000
September 34,025
October 15,100
November 52,000
December 193,000
Year-end accounts receivable $300,000
  1. a. Use the year-end total to evaluate the firm’s collection system.
  2. b. If 70% of the firm’s sales occur between July and December, would this information affect the validity of your conclusion in part a? Explain.
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Eccles Inc., a zero-growth firm, has an expected EBIT of $100.000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. If the effective personal tax rates on debt income and stock income are Td = 25% and TS = 20% respectively, what is the value of the firm according to the Miller model (Based on the same unlevered firm value in the earlier question)? a. $475,875 b. $536,921 c. $587,750 d. $623,050 e. $564,167
Refer to the data for Eccles Inc. earlier. If the effective personal tax rates on debt income and stock income are Td = 25% and TS = 20% respectively, what is the value of the firm according to the Miller model (Based on the same unlevered firm value in the earlier question)? a. $475,875 b. $536,921 c. $587,750 d. $623,050 O $564,167

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Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)

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Accounts Receivable and Accounts Payable; Author: The Finance Storyteller;https://www.youtube.com/watch?v=x_aUWbQa878;License: Standard Youtube License