BUSI 320 Connect Homework 3 Liberty University Complete Answer
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Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold are anticipated as follows:
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.
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.)
Biochemical Corp. requires $710,000 in financing over the next three years. The firm can borrow the funds for three years at 11.60 percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short-term financing instead, she will pay 8.25 percent interest in the first year, 12.75 percent interest in the second year, and 9.50 percent interest in the third year. Assume interest is paid in full at the end of each year.
Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $220,000. The company can borrow $220,000 for three years at 12 percent annual interest or for one year at 10 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 10 percent rate? Compare this to the 12 percent three-year loan.
b. What if interest rates on the 10 percent loan go up to 15 percent in year 2 and 18 percent in year 3? What would be the total interest cost compared to the 12 percent, three-year loan?
Assume that Hogan Surgical Instruments Co. has $2,200,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent, but with a high-liquidity plan, the return will be 11 percent. If the firm goes with a short-term financing plan, the financing costs on the $2,200,000 will be 7 percent, and with a long-term financing plan, the financing costs on the $2,200,000 will be 9 percent.
Assume that Atlas Sporting Goods Inc. has $940,000 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 $940,000 will be 12 percent, and with a long-term financing plan, the financing costs on the $940,000 will be 13 percent.
Colter Steel has $5,500,000 in assets.
Short-term rates are 8 percent. Long-term rates are 13 percent. Earnings before interest and taxes are $1,160,000. 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?
Colter Steel has $4,950,000 in assets.
Assume the term structure of interest rates becomes inverted, with short-term rates going to 10 percent and long-term rates 4 percentage points lower than short-term rates. Earnings before interest and taxes are $1,050,000. The tax rate is 40 percent.
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- Submitted On 20 Oct, 2019 10:48:03