Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 7, Problem 11FPE

Deciding whether to pay cash or finance a purchase. Use Worksheet 7.2. Matilda Edwards wants to buy a home entertainment center. Complete with a big-screen TV, DVD, and sound system, the unit would cost $4,500. Matilda has over $15,000 in a money market fund, so she can easily afford to pay cash for the whole thing (the fund is currently paying 3 percent interest, and Matilda expects that yield to hold for the foreseeable future). To stimulate sales, the dealer is offering to finance the full cost of the unit with a 36-month, simple interest installment loan at 6 percent.

Matilda wants to know whether she should pay cash for the home entertainment center or buy it on time. (Note: While Matilda is in the 22 percent tax bracket she does not itemize deductions on her tax returns.) Briefly explain.

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You've collected the following information from your favorite financial website. 52-Week Price Dividend Hi 77.40 Lo Stock (Dividend) Yield % PE Ratio Close Price Net Change 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.04 70.05 YBM 2.55 2.9 10 89.08 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 20.74 Winter Sports .32 1.5 28 15.43 ?? -.26 .18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 21 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent, indefinitely. Assume investors require a return of 14 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
1. Waterfront Inc. wishes to borrow on a short-term basis without reducing its current ratio below 1.25. At present its current assets and current liabilities are $1,600 and $1,000 respectively. How much can Waterfront Inc. borrow?
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