EBK PFIN
6th Edition
ISBN: 8220103648844
Author: Billingsley
Publisher: CENGAGE L
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Chapter 7, Problem 1LO
Summary Introduction
To discuss: The consumer loan and its different types.
Expert Solution & Answer
Explanation of Solution
There is a loan that is taken by people to buy the really costly products and they cannot buy those products from their normal income and this type of loan is considered as a consumer loan. This loan is taken to accomplish a long-lasting goal such as funding education fees, purchasing products, or some non-durable products such as funding expensive vacations. Consumer loans have a formal process and also considered as a contract with negotiation under which the borrowing terms and the schedule of the repayment are specified.
Major types of consumer loans
- Auto loans: This type of loan is taken for vehicles such as financing of SUV, car, truck, etc. With this type of loan, approx.80% of the cost of a vehicle can be financed. It is a type of secured loan as collateral is given against the loan.
- Loans for durable goods: This type of loan is taken to finance some costly products such as TV, computer, mobile, etc. The maturity of this loan depends on the type of product purchased from the loan.
- Consolidation loans: This type of loan is taken to repay another credit. This type of loan helps in handling an unhealthy credit situation of a person.
- Education loans: A consumer loan is also taken for the funding of education. This type of loan can be taken by the students as well as parents of the students.
Other types of consumer loans based on repayment of the loan
- Single-payment loans: In this type of loan, the principal and interest amount is paid after a certain period as a lump-sum amount. This type of loan is taken by people to avoid installment based loans.
- Installment loans: In this type of loan, the amount is paid in a series in which a fixed amount is paid on the predetermined dates instead of paying the lump-sum amount.
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QUESTION #1:
A) What is the Net Operating Profit After Tax (NOPAT) for 2024?B) What is the Operating Cash Flow for 2024?
C) What is the Free Cash Flow for 2024?
Note: Marketable securities are non-operating current assets, and short-term debt (bank loan) is a non-operating current liability. Both of these items are excluded from the calculation of net operating working capital.
D) If the stock trades for $85 per share at the end of 2024, and there are 315,000 shares outstanding, what is the MVA in 2024?
E) Given that the firm’s WACC is 14%, what is the EVA during 2024?
F) Create common size income statement and balance sheet for 2024, 2023 and 2022.
G) Using 2022 as the base year, create income statement and balance sheet percentage change analysis for 2024 and 2023.
QUESTION #2:
In addition to the AAA Ltd. financial statements in Problem One, you are given more information as follows.
Sales are forecast to increase by 80% in 2025.
Short-term Debt, Long-term Debt, and Common…
Brightwoodę Furniture provides the following financial data for a
given enod:
Sales
Less Variable E
Contribwaon Margin
Less Fixed Expenses
et Income
-
Aount ($) Per Unit ($)
150,000
3
L96,000
13
10
35,000
25,000
a. What is the company's CM ratio?
b. If quarterly sales increase by $5,200 and there is no change in fixed
expenses, by how much would you expect quarterly net operating
income to increase?
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