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Liberty University BUSI 320 connect homework 3 correct answers 100% guaranteed with explanations

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    Liberty University BUSI 320 connect homework 3 correct answers 100% guaranteed with explanations Sharpe Knife Company expects sales next year to be $1,720,000 if the economy is strong, $910,000 if the economy is steady, an d $720,000 if the economy is weak. Mr. Sharpe believes there is a 10 percent probability the economy will be strong, a 45 perce nt probability of a steady economy, and a 45 percent probability of a weak economy. What is the expected level of sales for the next year? Antivirus Inc. expects its sales next year to be $2,200,000. Inventory and accounts receivable will increase by $450,000 to accommodate this sales level. The company has a steady profit margin of 9 percent with a 20 percent dividend payout. Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows: What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing c ost and the total for the four months? Biochemical Corp. requires $580,000 in financing over the next three years. The firm can borrow the funds for three years at 12.90 percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short - term financing instead, she will pay 9.75 percent interest in the first year, 14.50 percent interest in the second year, and 10.90 percent interest in the third y ear. Assume interest is paid in full at the end of each year Determine the total interest cost under each plan Which plan is less costly Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $440,000. The company can borrow $440,000 for three years at 14 percent annual interest or for one year at 12 percent annual interest. Assu me interest is paid in full at the end of each year. How much would Sauer Food Company save in interest over the three - year life of the computer system if the one - year loan is utilized and the loan is rolled over (reborrowed) each year at the same 12 percent rate? Compare this to the 14 percent three - year loan What if interest rates on the 12 percent loan go up to 18 percent in year 2 and 21 percent in year 3? What would be the total interest cost compared to the 14 percent, three - year loan? Assume that Hogan Surgical Instruments Co. has $4,100,000 in assets. If it goes with a low - liquidity plan for the assets, it can earn a return of 14 percent, but with a high - liquidity plan, the return will be 10 percent. If the firm goes with a short - term financing plan, the financing costs on the $4,100,000 will be 6 percent, and with a long - term financing plan, the financing costs on the $4,100,000 will be 8 percent Compute the anticipated return after financing costs with the most aggressive asset - financing mix Compute the anticipated return after financing costs with the most conservative asset - financing mix Compute the anticipated return after financing costs with the two moderate approaches to the asset - financing mix. Assume that Atlas Sporting Goods Inc. has $1,010,000 in assets. If it goes with a low - liquidity plan for the assets, it can earn a return of 18 percent, but with a high - liquidity plan the return will be 15 percent. If the firm goes with a short - term financing plan, the financing costs on the $1,010,000 will be 12 percent, and with a long - term financing plan, the financing costs on the $1,010,000 will be 14 percent Compute the anticipated return after financing costs with the most aggressive asset - financing mix Compute the anticipated return after financing costs with the most conservative asset - financing mix Compute the anticipated return after financing costs with the two moderate approaches to the asset - financing mix. If the firm used the most aggressive asset - financing mix described in part a and had the anticipated return you computed for part a, what would earnings per share be if the tax rate on the anticipated return was 30 percent and there were 20,000 shares outsta nding Short - term rates are 12 percent. Long - term rates are 17 percent. Earnings before interest and taxes are $1,200,000. The tax rate is 40 percent Assume the term structure of interest rates becomes inverted, with short - term rates going to 14 percent and long - term rates 4 percentage points lower than short - term rates. Earnings before interest and taxes are $1,190,000. The tax rate is 30 percent If long - term financing is perfectly matched (synchronized) with long - term asset needs, and the same is true of short - term financing, what will earnings after taxes be? Guardian Inc. is trying to develop an asset - financing plan. The firm has $440,000 in temporary current assets and $340,000 in permanent current assets. Guardian also has $540,000 in fixed assets. Assume a tax rate of 30 percent Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 60 percent of assets fi nanced by long - term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long - term sources. The current interest rate is 11 percent on long - term funds and 6 percent on short - term financing. Compute the annual interest payments under each plan Given that Guardian’s earnings before interest and taxes are $320,000, calculate earnings after taxes for each of your alternatives. What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short - term and long - term interest rates were reversed? Lear Inc. has $900,000 in current assets, $400,000 of which are considered permanent current assets. In addition, the firm ha s $700,000 invested in fixed assets Lear wishes to finance all fixed assets and half of its permanent current assets with long - term financing costing 8 percent. The balance will be financed with short - term financing, which currently costs 5 percent. Lear’s earnings before interest and taxes are $300,000. Determine Lear’s earnings after taxes under this financing plan. The tax rate is 30 percent As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half of its temporary current assets with long - term financing and the balance with short - term financing. The same interest rates apply as in part a . Earnings before interest and taxes will be $300,000. What will be Lear’s earnings after taxes? The tax rate is 30 percent Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securiti es with maturities of two, three, and four years based on the following data Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows Compute total dollar interest payments for the six months Compute the total dollar interest payments if long - term financing at 12 percent had been utilized throughout the six months If long - term financing at 12 percent had been utilized throughout the six months, would the total - dollar interest payments be larger or smaller than with the short - term financing plan? Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows: What long - term interest rate would represent a break - even point between using short - term financing and long - term financing Bombs Away Video Games Corporation has forecasted the following monthly sales Construct a monthly production and inventory schedule in units. Beginning inventory in January is 41,000 units. Prepare a monthly schedule of cash receipts. Sales in December before the planning year are $100,000 Prepare a cash payments schedule for January through December. The production costs of $2 per unit are paid for in the month in which they occur. Other cash payments, besides those for production costs, are $61,000 per month

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    Prepare a monthly cash budget for January through December using the cash receipts schedule from part b and the cash payments schedule from part c . The beginning cash balance is $5,000, which is also the minimum desired Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that th rough the establishment of local collection centers around the country, she can speed up the collection of payments by two days. Fu rthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one - half day without affecting suppliers. The bank has a remote disbursement center in Florida If Neon Light Company has $3.15 million per day in collections and $1.23 million per day in disbursements, how many dollars w ill the cash management system free up If Neon Light Company can earn 8 percent per annum on freed - up funds, how much will the income be? If the total cost of the new system is $490,000, should it be implemented Postal Express has outlets throughout the world. It also keeps funds for transactions purposes in many foreign countries. Ass ume in 2010 it held 400,000 reals in Brazil worth 330,000 dollars. It drew 14 percent interest, but the Brazilian real declined 28 p ercent against the dollar What is the value of its holdings, based on U.S. dollars, at year - end What is the value of its holdings, based on U.S. dollars, at year - end if instead it drew 11 percent interest and the real went up by 15 percent against the dollar? Mervyn’s Fine Fashions has an average collection period of 35 days. The accounts receivable balance is $56,000 What is the value of its annual credit sales Route Canal Shipping Company has the following schedule for aging of accounts receivable: Calculate the percentage of amount due for each month If the firm had $1,452,000 in credit sales over the four - month period, compute the average collection period. Average daily sales should be based on a 120 - day period If the firm likes to see its bills collected in 31 days, should it be satisfied with the average collection period Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 84,500 units per year, an ordering cost of $4 per order, and carrying costs of $1.60 per unit What is the economic ordering quantity What will the average inventory be? What is the total cost of ordering and carrying inventory Diagnostic Supplies has expected sales of 120,000 units per year, carrying costs of $6 per unit, and an ordering cost of $9 p er order. What is the economic ordering quantity What will the new average inventory be Wisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $31,900, but inventory would increase by $290,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 12.5 percent Determine the extra cost or savings of switching over to level production Should the company go ahead and switch to level production Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would inc rease by $146,000 if credit is extended to these new customers. Of the new accounts receivable generated, 8 percent will prove to be uncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 72 percent of sales. The firm is in the 10 percent tax bracket. Compute the incremental income after taxes What will Johnson’s incremental return on sales be if these new credit customers are accepted Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 8 percent of the new accounts will be uncollectible. Collection costs are 3 percent of new sales, production and selling costs are 80 percent, and the accounts receivable turnover is five times. Assume income taxes of 35 percent and an increase in sales of $82,000. No other asset buildup will be required to service the new accounts What additional investment in accounts receivable is needed to support this sales expansion What would be the total incremental investment in accounts receivable and inventory needed to support a $82,000 increase in s ales Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $324,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will also incur $17,000 in additional collect ion expense. Production and marketing costs represent 72 percent of sales. The firm is in a 35 percent tax bracket and has a receivables t urnover of four times. No other asset buildup will be required to service the new customers. The firm has a 8 percent desired return Calculate the incremental income after taxes Calculate the incremental income after taxes if 15 percent of the new sales prove to be uncollectible Dome Metals has credit sales of $360,000 yearly with credit terms of net 45 days, which is also the average collection period . Dome does not offer a discount for early payment, so its customers take the full 45 days to pay What is the average receivables balance What is the receivables turnover Dome Metals has credit sales of $216,000 yearly with credit terms of net 45 days, which is also the average collection period . Assume the firm adopts new credit terms of 2/15, net 45 and all customers pay on the last day of the discount period. Any reduction in accounts receivable will be used to reduce the firm's bank loan which costs 9 percent. The new credit terms will increase sales by 10 percent because the discount will make the firm's price competitive If Dome earns 20 percent on sales before discounts, what will be the net change in income if the new

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    1. award: 1 out of 1.00 point Sharpe Knife Company expects sales next year to be $1,720,000 if the economy is strong, $910,000 if the economy is steady, and $720,000 if the economy is weak. Mr. Sharpe believes there is a 10 percent probability the economy will be strong, a 45 percent probability of a steady economy, and a 45 percent probability of a weak economy. What is the expected level of sales for the next year? Expected level of sales $ 905,500 ± 0.1% rev: 03_07_2014_QC_46438 Explanation: Sharpe Knife Company State of Economy Sales Probability Expected Outcome Strong $ 1,720,000 .10 $ 172,000 Steady 910,000 .45 409,500 Weak 720,000 .45 324,000 Expected level of sales = $ 905,500 2. award: 1 out of 1.00 point Antivirus Inc. expects its sales next year to be $2,200,000. Inventory and accounts receivable will increase by $450,000 to accommodate this sales level. The company has a steady profit margin of 9 percent with a 20 percent dividend payout. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing. External funds needed $ 291,600 ± 0.1% Explanation: Net income = .09 × $2,200,000 = $198,000 Dividends = .20 × $198,000 = $39,600 Net $ 198,000

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    income Less: Dividends 39,600 Increase in retained earnings $ 158,400 Increase in assets $ 450,000 Less: Increase in retained earnings 158,400 External funds needed $ 291,600 3. award: 0.56 out of 1.00 point Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows: March 3,650 April 7,650 May 12,300 June 10,300 33,900 If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory buildup. The production manager thinks the preceding assumption is too optimistic and decides to go with level production to avoid being out of merchandise. He will produce the 33,900 units over four months at a level of 8,475 per month. a. What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running total. (Leave no cells blank - be certain to enter "0" wherever required.) Ending

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    Inventory March 4,825 ± 0.1% units April 5,650 ± 0.1% units May 1,825 ± 0.1% units June 0 units b. If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1.0 percent as the monthly rate.) (Leave no cells blank - be certain to enter "0" wherever required.) Inventory Financing Cost March $ 579 ± 1% April 678 ± 1% May 219 ± 1% June 0 Total financing cost $ 1,476 ± 1% Explanation: a. Bambino Sporting Goods Units Sold Units Produced Change in Inventory Ending Inventory Units March 3,650 8,475 4,825 4,825 April 7,650 8,475 825 5,650 May 12,300 8,475 – 3,825 1,825 June 10,300 8,475 – 1,825 0 b. Bambino Sporting Goods Ending Inventory Units Total Cost ($12 per unit) Inventory Financing Cost (at 1.0% per month) March 4,825 $57,900 $ 579 April 5,650 67,800 678 May 1,825 21,900 219 June 0 0 0 Total financing cost = $ 1,476

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    4. award: 1 out of 1.00 point Biochemical Corp. requires $580,000 in financing over the next three years. The firm can borrow the funds for three years at 12.90 percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short - term financing instead, she will pay 9.75 percent interest in the first year, 14.50 percent interest in the second year, and 10.90 percent interest in the third year. Assume interest is paid in full at the end of each year. a. Determine the total interest cost under each plan. Interest Cost Long - term fixed - rate $ 224,460 ± 0.1% Short - term variable - rate $ 203,870 ± 0.1% b. Which plan is less costly? Short - term variable - rate plan Explanation: a. Long - term fixed - rate interest cost = 3 × (.1290 × $580,000) = $224,460 Short - term variable - rate interest cost: Year 1 interest = .0975 × $580,000 = $56,550 Year 2 interest = .1450 × $580,000 = $84,100 Year 3 interest = .1090 × $580,000 = $63,220 Total interest = $56,550 + 84,100 + 63,220 = $203,870 b. The short - term variable - rate financing plan has the lower cost. 5. award: 1 out of 1.00 point Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $440,000. The company can borrow $440,000 for three years at 14 percent annual interest or for one year at 12 percent annual interest. Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three - year life of the computer system if the one - year loan is utilized and the loan is rolled over (reborrowed) each year at the same 12 percent rate? Compare this to the 14 percent three - year loan.

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    Interest 12 percent loan $ 158,400 ± 0.1% 14 percent loan $ 184,800 ± 0.1% Interest savings $ 26,400 ± 0.1% b. What if interest rates on the 12 percent loan go up to 18 percent in year 2 and 21 percent in year 3? What would be the total interest cost compared to the 14 percent, three - year loan? Interest Fixed - rate 14% loan $ 184,800 ± 0.1% Variable - rate loan $ 224,400 ± 0.1% Additional interest cost $ 39,600 ± 0.1% Explanation: a. 12% fixed - rate interest cost = 3 × (.12 × $440,000) = $158,400 14% fixed - rate interest cost = 3 × (.14 × $440,000) = $184,800 Interest savings = $184,800 − 158,400 = $26,400 b. 14% fixed - rate interest cost = 3 × (.14 × $440,000) = $184,800. Short - term variable - rate interest cost: Year 1 interest = .12 × $440,000 = $52,800 Year 2 interest = .18 × $440,000 = $79,200 Year 3 interest = .21 × $440,000 = $92,400 Total interest = $52,800 + 79,200 + 92,400 = $224,400 Additional interest cost = $224,400 − 184,800 = $39,600 6. award: 2 out of 2.00 points Assume that Hogan Surgical Instruments Co. has $4,100,000 in assets. If it goes with a low - liquidity plan for the assets, it can earn a return of 14 percent, but with a high - liquidity plan, the return will be 10 percent. If the firm goes with a short - term financing plan, the financing costs on the $4,100,000 will be 6 percent, and with a long - term financing plan, the financing costs on the $4,100,000 will be 8 percent. a. Compute the anticipated return after financing costs with the most aggressive asset - financing mix. Anticipated return $ 328,000 ± 0.1%

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    b. Compute the anticipated return after financing costs with the most conservative asset - financing mix. Anticipated return $ 82,000 ± 0.1% c. Compute the anticipated return after financing costs with the two moderate approaches to the asset - financing mix. Anticipated Return Low liquidity $ 246,000 ± 0.1% High liquidity $ 164,000 ± 0.1% Explanation: a. Most aggressive: Low liquidity return $ 4,100,000 × .14 = $ 574,000 Short - term financing cost 4,100,000 × .06 = – 246,000 Anticipated return $ 328,000 b. Most conservative: High liquidity return $ 4,100,000 × .10 = $ 410,000 Long - term financing cost 4,100,000 × .08 = – 328,000 Anticipated return $ 82,000 c. Moderate approach: Low liquidity return $ 4,100,000 × .14 = $ 574,000

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    Long - term financing cost 4,100,000 × .08 = – 328,000 $ 246,000 High liquidity return $ 4,100,000 × .10 = $ 410,000 Short - term financing cost 4,100,000 × .06 = – 246,000 $ 164,000 7. award: 3 out of 3.00 points Assume that Atlas Sporting Goods Inc. has $1,010,000 in assets. If it goes with a low - liquidity plan for the assets, it can earn a return of 18 percent, but with a high - liquidity plan the return will be 15 percent. If the firm goes with a short - term financing plan, the financing costs on the $1,010,000 will be 12 percent, and with a long - term financing plan, the financing costs on the $1,010,000 will be 14 percent. a. Compute the anticipated return after financing costs with the most aggressive asset - financing mix. Anticipated return $ 60,600 ± 0.1% b. Compute the anticipated return after financing costs with the most conservative asset - financing mix. Anticipated return $ 10,100 ± 0.1% c. Compute the anticipated return after financing costs with the two moderate approaches to the asset - financing mix. Anticipated Return Low liquidity $ 40,400 ± 0.1% High liquidity $ 30,300 ± 0.1% d. If the firm used the most aggressive asset - financing mix described in part a and had the anticipated return you computed for part a , what would earnings per share be if the tax rate on the anticipated return was 30 percent and there were 20,000 shares outstanding? (Round your answer to 2 decimal places.) Earnings per share $ 2.12 ± 1%

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    e - 1. Now assume the most conservative asset - financing mix described in part b will be utilized. The tax rate will be 30 percent. Also assume there will only be 5,000 shares outstanding. What will earnings per share be? (Round your answer to 2 decimal places.) Earnings per share $ 1.41 ± 1% e - 2. Would the conservative mix have higher or lower earnings per share than the aggressive mix? Lower Explanation: a. Most aggressive: Low liquidity return $1,010,000 × .18 = $181,800 Short - term financing cost 1,010,000 × .12 = – 121,200 Anticipated return 60,600 b. Most conservative: High liquidity return $1,010,000 × .15 = $151,500 Long - term financing cost 1,010,000 × .14 = – 141,400 Anticipated return 10,100 c. Moderate approach: Low liquidity return $1,010,000 × .18 = $181,800 Long - term financing cost 1,010,000 × .14 = – 141,400 Anticipated return $40,400 High liquidity return $1,010,000 × .15 = $151,500 Short - term financing cost 1,010,000 × .12 = – 121,200 Anticipated return $30,300 d. Anticipated return $60,600

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    Taxes (30%) 18,180 Earnings after taxes $42,420 Shares 20,000 Earnings per share $2.12 e - 1. Anticipated return $10,100 Taxes (30%) 3,030 Earnings after taxes $7,070 Shares 5,000 Earnings per share $1.41 e - 2. The more conservative financing mix has lower earnings per share. 8. award: 2 out of 2.00 points Colter Steel has $5,700,000 in assets. Temporary current assets $ 3,400,000 Permanent current assets 1,620,000 Fixed assets 680,000 Total assets $ 5,700,000 Short - term rates are 12 percent. Long - term rates are 17 percent. Earnings before interest and taxes are $1,200,000. The tax rate is 40 percent. If long - term financing is perfectly matched (synchronized) with long - term asset needs, and the same is true of short - term financing, what will earnings after taxes be?

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