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2 years ago

Paper Submarine Manufacturing is investigating a lockbox system to reduce its collection time. It has determined the following:

Business

2 answers:

erik [133]2 years ago

5 0

Answer:

$770,245

Explanation:

The reduction in cash balances associated with implementing the system can be calculated as follows;

Average Value of collection for 4 days = Average daily cash receipts x Reduction in collection time

Where;

Average daily cash receipts = Average number of payments per day x Average value of payment

Average daily cash receipts = 355 x $945

Average daily cash receipts = $335,475

Reduction in collection time = 4

Average Value of collection for 4 days = $335,475 x 4

Average Value of collection for 4 days = $1,341,900

Lockbox fee per day = Average number of payments per day x Variable lockbox fee (per transaction)

where;

Variable lockbox fee (per transaction) = $0.30

Lockbox fee per day = 355 x $0.30

Lockbox fee per day = $106.50

Annual Interest Rate = 0.068

Since all the values are on a day basis, so let us find the value on interest per day, as follows;

Daily Interest Rate = Annual Interest Rate / No. of days in a year

Daily Interest Rate = 0.068 / 365

Daily Interest Rate = 0.0001232877

Hence, Present Value of the Lock Box can be calculated as follows;

Present Value of Lock Box = Lockbox fee per day / Daily Interest Rate

Present Value of Lock Box = $106.50 / 0.0001863014

Present Value of Lock Box = $571,654

Therefore the NPV of the Lock Box can be calculated as follows;

NPV of the Lock Box = Average Value of collection for 1.5 days - Present Value of Lock Box

NPV of the Lock Box = $1,341,900 - $571,654

NPV of the Lock Box = $770,245

Since the value of NPV is positive, Paper Submarine Manufacturing, should consider using the lock box system.

Ostrovityanka [42]2 years ago

3 0

Answer:

-1,185,282.35‬

Explanation:

The average daily collections are the average number of payments times the average value of a payment, so:

Average daily collections = =355 * 945

Average daily collections = $335,475

The present value of the lockbox service is the average daily receipts times the number of days the collection is reduced, so:

PV = (4 day reduction)( $335,475)

PV = $1,341,900‬

The daily cost is a perpetuity. The present value of the cost is the daily cost divided by the daily interest rate. So:

PV of cost = (.3*355)/.00068

PV of cost = $106.5/.00068= $156,617.65

The firm should take the lockbox service. The NPV of the lockbox is the cost plus the present value of the reduction in collection time, so:

NPV = $156,617.65 - 1,341,900

NPV = -1,185,282.35‬

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Morgarella [4.7K]

Answer:

The company needs to borrow $10,000

Explanation:

First, let us state the information given clearly:

Beginning cash balance = $45,000

total cash receipt = $129,000

total cash disbursement = $124,000

desired ending cash balance = $60,000

Next Let us calculate the net cash available after the period's transactions:

Net available cash from transactions = total receipt - total disbursements

= 129,000 - 124,000 = $5,000

Next we were told that the beginning balance = $45,000

This means that without borrowing ;

the net ending cash balance = Net available cash from transactions + beginning cash balance = 5,000 + 45,000 = $50,000

Finally, we are told that the desired ending cash balance = $60,000, and the amount of cash available = $50,000, therefore to meet up the target, the amount that needs to be borrowed is calculated thus:

desired ending cash = available cash + borrowed amount

60,000 = 50,000 + borrowed amount

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hence the company needs to borrow $10,000

3 0

3 years ago

What is noncompetition?

Valentin [98]

Answer:

A lack of competition

Explanation:

Non = absence

competition = the act of competing in a event

Which means noncompetition would mean "a lack or a absence of competition."

Hope this helps.

8 0

3 years ago

Read 2 more answers

The government of Diarmina recently passed a law that requires foreign companies to partner with Diarminian companies if they wa

baherus [9]

Answer:

C) policy uncertainty

Explanation:

Policy uncertainty is the class of economic risks associated with the irregular economic policy of a particular country's government. Policy uncertainty discourages investment and increases the investment risk factor of the economy.
This can come from the regime's volatile and unpredictable monetary or fiscal policy or unpredictable regulatory framework.

so correct answer is C) policy uncertainty

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3 years ago

You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equ

taurus [48]

Answer:

8.15 %

Explanation:

Weighted Average Cost of Capital (WACC) is the business Cost of permanent sources of finance pooled together. It shows the risk of the business and is used to evaluate projects.

WACC = Cost of Equity x Weight of Equity + Cost of Preferred Stock x Weight of Preferred Stock + Cost of Debt x Weight of Debt

Remember to use the After tax cost of debt :

After tax cost of debt = Interest x ( 1 - tax rate)

= 6.50% x (1 - 0.40)

= 3.90 %

therefore,

WACC = 11.25% x 55% + 6.00% x 10% + 3.90 % x 35%

= 8.15 %

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Quigley's WACC is closest to 8.15 %.

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3 years ago

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Answer:

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Explanation:

Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D0 * (1+g) / (r - g)

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D0 is the dividend paid recently

D0 * (1+g) is dividend expected for the next period /year

g is the growth rate

r is the required rate of return or cost of equity

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P0 = $26.5925 rounded off to $26.59

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3 years ago