## Description

1. Accounts Payable: 480,000

Notes Payable: 241,000

Current Liabilities: 721,000

Long-Tern Debt: 1,186,000

Common Equity: 5,332,000

Total liabilities and equity: 7,239,000

What percentage of the firm’s assets does the firm finance using debt?

If Campbell were to purchase a new warehouse for $1.4 million and finance it entirely with long-term debt, what would be the firm’s new debt ratio?

2.$5,000 invested for 9 years at 10% compounded annually will accumulate to __?

3. You just received a bonus of $4,000.

A. Calculate the future value of $4k given that it will be held in the bank for 5 years and earn an annual interest rate of 8 percent.

B. Recalculate part A using a compounding period that is (1) semiannual and (2) bimonthly.

C. Recalculate parts a and b using a annual interest rate of 16%

d. recalculate parts a using time horizon of 10 years at the annual interest rate of 8%

e/ what conclusions can you draw when you compare the answers in parts c and d with the answers in parts a and b?

4. The Marvel MFG Company is considering whether or not to construct a new robotic production facility. The cost of this new facility is $618,000 and it is expected to have a six-year life with annual depreciation expense of #103,000 and no salvage value. Annual sales are expected to be 1,980 units with a price of $910 per unit. Variable production costs are $590 per unit, while fixed cash expenses are $80,000 per year.

A. Find the accounting and the cash break-even units of productions.

B. Will the plant make a profit based on its current level of operations?

C. Will the plant contribute cash flow to the firm at the expected level of operations?

5. Accounting Break-even point, Price per unit, Variable cost per unit, fixed costs, depreciation:

A. 6,250, ?, $58, $99,000, $25,000

B. 780, $960, ?, $503,000, $97,000

C. 2,000, $23, $13, $5,000, ?

D. 2,000, $23, $6, ? $18,000

Calculate the missing info.

Note that projects C and D share the same accounting break even point. If sales are above the break even point, which project would you prefer and why?

Calculate the cash break even for each project. What differences in accounting and cash break-even tell you about the four projects?

Accounts payable: 528,000

Notes Payable: 253,000

Current Liabilities: $784,000

Long-Term Debt: $1,288,000

Common Equity: $5423,000

Total Liabilities and equity: $7,495.000

What percentage of the firm’s assets does the firm finance using debt?

If Campbell were to purchase a new warehouse for $1.5 million and finance it entirely with long-term debt, what would be the new debt ratio?

6. $5,100 invested for 9 years at 9% compounded annually will accumulate to ?

7. You just received a bonus if $3,000

A. Calculate the future value of 3K given that it will be held in the bank for 9 years and earn an annual interest rate of 4%

B. Recalculate part a using a compounding period that is semiannual and bimonthly.

C. Recalculate a and b using an annual interest rate of 8%

D. Recalc a using a time horizon of 18 yrs at annual interest rate of 4%

E. What conclusion can you draw when you compare the answers in c and d with the answers in a and b?

8. Marvel co. is considering whether or not to construct a new robotic production facility. The cost is $630,000 and is expected to have a 6 year life with annual depreciation expense of $105,000 and no salvage value. Annual sales from the new facility are expected to be 2,020 units with a price of 1,010 per unit. Variable production costs are $640 per unit, while fixed cash expenses are $80k per year.

A. Find the account and the cash break even units of production.

B. Will the plant make a profit based on its current expected level of operations?

C. Will the plant contribute cash flow to the firm at the expected level of operations?

9. Accounting Break-even point, Price per unit, Vairble cost per unit, Fixed Costs and Depreciation:

A. 6,220; ?; $57; $98,000; $27,000

B. 750, $950, ?, $504,000, $97000

C. 1,960, $20, $15, $4,700, ?

D. 1,960, $20, $8, ?, $14,000

Calculate missing info

Note that projects c and d share the same accounting break even. If sales are above the break-even point, which project would you prefer and why?

Calculate the cash break even for each of the above projects. What do the differnces in accounting and cash break even tell you about the four projects?

10.Sharpe projected sales for 1st 8 moths of 2014 are:

Jan: $90,800, Feb: 120,000, March: 135,800, April: 240,900, May: 300,100, June: 269,500, Junly: 224,300, August: 150,600

Of Sharpes sales, 10% is for cash, another 60% is collected in the month following the sale, and 30% is collected in the second month following the sale.

Nov and Dec sales for 2013 were 219,900, and 174,900.

Sharpe purchases its raw materials two months in advance of its sales equal to the 60% of their final sales price. The supplier is paid one month after it makes delivery. For example, purchases for April sales are made in February and payment is made in March.

In addition, Sharpe pays $9,800 per month for rent and 20,400 each month for other expenditures. Tax prepayments of 21,700 are made each quarter, beginning in March.

The companys cash balance at Dec 31, 2013 was 22,400, a minimum balance of 15,000 must be maintained at all times. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available.

Interest on short term loans (11%) is paid monthly. Borrowing to meet established monthly cash needs takes place at the beginning of the month. Thus, if the month of April the firm expencts to have a need for an additional 59,850, these funds would be borrowed at the beginning of April with interest of 548, owed for April paid at the beginning of May.

A. Prepare a cash Buget for Sharpe covering the first seven months of 2014:

Cash Receipts

Sales for cash (10%)?

First month after sales (60%)?

Second month after sales (30%)?

Total?

Cash Disbursements?

Raw Materials?

Rent?

Other? Tax prepayments?

Total cah disbursements?

Net change in cash for period?

+Beginning cash balance?

-Interest on short term borrowing

-Short term borrowing repayments

=Ending cash balance b/ borrowing

Financing needed for period?

Ending Casg Balance?

Cumulative borrowing?

B. Sharpe has $199,600 in notes payable due in July that must be repaid or renegotiated for an extension. Will they have enough to repay the notes?

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