Logo
Question DetailsNormal
$ 20.00
Financial and Contract Management – 595.466
Question posted by
request

 

 

1.         You have really enjoyed the early years of your working life, just turned 45 and have saved zero for retirement.  You have really enjoyed the early years of your working life, just turned 45 and have saved zero for retirement.  You wish to retire in 20 years, at which time you want to have accumulated enough money to receive an annual annuity of $12,000 for 25 years after retirement. During the period before retirement you can earn 8 percent annually, while after retirement you can earn 10 percent on your money. What annual contributions to the retirement fund will allow you to receive the $12,000 annuity?  (5 points)  

 

2.         Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented below. (6 points)

                                                   Cain

3.       

           Able

Debt @ 10%............

$  50,000

4.       

Debt @ 10%......

$100,000

Common stock,

$10 par.....................

100,000

5.       

Common stock, $10 par...............

    50,000

Total........................

$150,000

6.       

Total...................

 $150,000

Common shares.......

10,000

7.       

Common shares.

       5,000

a.    If the cost of debt went up to 12 percent and all other factors remained equal, what would be the break-even level for EBIT?

 

BONUS QUESTION (optional) – 10 points

Harry's Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures:

 

Actual                                 Forecast                       Additional Information

November...........    $200,000      January...........   $280,000   April forecast......   $330,000

December............      220,000      February.........     320,000

                                                    ........................ March……….........................     340,000

 

 

Of the firm's sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 percent are paid in the second month after the sale. Materials cost 30 percent of sales and are purchased and received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after they are received. Labor expense is 40 percent of sales and is paid for in the month of sales. Selling and administrative expense is 5 percent of sales and is also paid in the month of sales. Overhead expense is $28,000 in cash per month.

Depreciation expense is $10,000 per month. Taxes of $8,000 will be paid in January, and dividends of $2,000 will be paid in March. Cash at the beginning of January is $80,000, and the minimum desired cash balance is $75,000.

For January, February, and March, prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments.  

 

Available Solution
$ 20.00
Financial and Contract Management – 595.466
  • This solution has not purchased yet.
  • Submitted On 19 Jun, 2017 04:45:43
Solution posted by
solution
1. You have really enjoyed the early years of your working life, just turned 45 and have saved zero for retirement. You have really enjoyed the early years of your working life, just turned 45 and have saved zero for retirement. You wish to retire in 20 years, at which time you want to have accumulated enough money to receive an annual annuity of $12,000 for 25 years after retirement. During the period before retirement you can earn 8 percent annually, while after retirement you can earn 10 percent on your money. What annual contributions to the retirement fund will allow you to receive the $12,000 annuity? (5 points) 2. Cain Auto Supplies and Able Auto Parts are competitors in the ...
Buy now to view full solution.
closebutton

$ 629.35