FOUND.OF FINANCIAL MANAGEMENT-ACCESS
17th Edition
ISBN: 9781260519969
Author: BLOCK
Publisher: MCG
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Textbook Question
Chapter 7, Problem 10DQ
Why might a firm keep a safety stock? What effect is it likely to have on carrying cost of inventory? (LO7-5)
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Dani Corporation has 3.4 million shares of common stock outstanding. The current share price is $84.50, and the book value per
share is $8.75. The company also has two bond issues outstanding. The first bond issue has a face value of $71 million, a coupon
rate of 5.1 percent, and sells for 95.5 percent of par. The second issue has a face value of $43 million, a coupon rate of 5.7 percent
and sells for 104.5 percent of par. The first issue matures in 21 years, the second in 9 years. The most recent dividend was $3.98 a
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outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21 percent.
What is the company's cost of equity?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Cost of equity
%
What is the company's aftertax cost of debt?
Note: Do not round intermediate…
Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Gateway's discount rate is 10.9%. The company plans to continue with
one of the two models for the foreseeable future. Based on the costs of each shown here, which should it choose? (Note: dollar amounts are in thousands.)
Based on the costs of each model, which should it choose? (Select the best choice below.)
OA. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller.
OB. Gateway Tours should choose Old Reliable because it lasts longer.
C. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller.
OD. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller.
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Model
Year 0
Year 1
Year 2
Year 3
Old Reliable
- $201
- $3.9
- $3.9
-$3.9
Year 4
-…
Chapter 7 Solutions
FOUND.OF FINANCIAL MANAGEMENT-ACCESS
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Why would a financial manager want to slow down...Ch. 7 - Use The Wall Street Journal or some other...Ch. 7 - Why are Treasury bills a favorite place for...Ch. 7 - Explain why the bad debt percentage or any other...Ch. 7 - What are three quantitative measures that can be...Ch. 7 - Prob. 8DQCh. 7 - What does the EOQ formula tell us? What assumption...Ch. 7 - Why might a firm keep a safety stock? What effect...
Ch. 7 - If a firm uses a just-in-time inventory system,...Ch. 7 - City Farm Insurance has collection centers across...Ch. 7 - Prob. 2PCh. 7 - Orbital Communications has operating plants in...Ch. 7 - Postal Express has outlets throughout the world....Ch. 7 - Thompson Wood Products has credit sales of...Ch. 7 - Oral Roberts Dental Supplies has annual sales of...Ch. 7 - Knight Roundtable Co. has annual credit sales of...Ch. 7 - Darla’s Cosmetics has annual credit sales of...Ch. 7 - Barney’s Antique Shop has annual credit sales of...Ch. 7 - Mervyn’s Fine Fashions has an average collection...Ch. 7 - Route Canal Shipping Company has the following...Ch. 7 - Nowlin Pipe & Steel has projected sales of 72,000...Ch. 7 - Fisk Corporation is trying to improve its...Ch. 7 - Prob. 14PCh. 7 - Diagnostic Supplies has expected sales of 84,100...Ch. 7 - Wisconsin Snowmobile Corp. is considering a switch...Ch. 7 - Johnson Electronics is considering extending trade...Ch. 7 - Henderson Office Supply is considering a more...Ch. 7 - Fast Turnstiles Co. is evaluating the extension of...Ch. 7 - Slow Roll Drum Co. is evaluating the extension of...Ch. 7 - Global Services is considering a promotional...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...Ch. 7 - Problems 22-25 are a series and should be...
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Inventory management; Author: The Finance Storyteller;https://www.youtube.com/watch?v=DZhHSR4_9B4;License: Standard Youtube License