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1) narrbegin: silly sally
silly sally, inc.
silly sally, inc. forecasts the following sales levels: january, $420; february, $435;
march, $450; and april, $470. historically, 40% of its sales are for cash. of the remaining
sales, 80% are collected in one month, 15% are collected in the second month, while
the rest remain uncollected. november sales were $380 and december sales were $500.
(all values $000)
purchases are made at 60% of the next months sales forecast, and are paid for in the
month of purchase. other cash outlays are: rent, $10 monthly; wages and salaries, $50
monthly; a tax payment of $30 in march; an interest payment of $15 in march; and a
planned purchase of $20 of new fixed assets in january.
narrend
suppose silly sally, inc. forecasts an ending cash balance of $20, its minimum desired
balance, in january. if februarys forecasted cash expenditures are $400, which of the
following describes the changes to silly sallys cash balance and level of borrowing, if
any, related to its minimum cash balance, at the end of february?
a.net cash flows of $21; borrowing will increase $21
b.net cash flows of $21; borrowing will decrease $21
c.net cash flows of $11; borrowing will increase $9
d.net cash flows of $11; borrowing will decrease $9
2) consider the cash receipts projections of emma inc. that is developing a cash budget
for october , november and december; sales in august and september were $200,000 and
$500,000 respectively. the forecast sales are $800,000, $900,000 and $200,000 for
october, november and december respectively. 15 % of sales are cash sales and 85% are
credit sales; collects about 60% of each months sales in the next month but waiting until
the following month for the remaining 25% of sales. bad debts are negligible. the firm
is expectsing cash dividend of $25,000 in december from a subsidiary.what are the
accounts receivable collected in october? (in thousands)
a.$350
b.$470
c.$300
d.$0
3) narrbegin: dilly deli
dilly deli, inc.
dilly deli, inc., a nation-wide chain of deli-style restaurants, has built a $34,000 balance
in one of its regional bank accounts. it wishes to move $30,000 to its main
concentration account. a dtc cost $1.50 and requires 3 days to clear; an edt costs $3.00
but requires only 1 day to clear; and a wire transfer costs $15 and clears the same day.
dilly deli, inc. can earn 7% on short term investments.
narrend
if the earnings rate for dilly deli, inc. is 3%, which of the following is true?
a.the wire transfer dominates both the dtc and edt
b.the wire transfer dominates the edt but not the dtc
c.the dtc dominates both the edt and the wire transfer
d.the edt dominates the dtc and the wire transfer
4) which of the following institutional venture capital fund categories controls the
dominate share of industry resources?
a.small business investment companies
b.financial venture capital funds
c.corporate venture capital funds
d.venture capital limited partnerships
5) the real return is 10% and the expected rate of inflation is 4.5%. what is the nominal
rate?
a.4.50%
b.14.95%
c.10.00%
d.8.69%
6) analysis of long-run performance of ipos:
a.clearly shows returns in line with non-ipo equity returns
b.is rather controversial and challenges the notion that investors are rational and that
financial markets are efficient
c.has not been performed
d.all of the above
e.both (b) and (c)
7) bavarian brew has an average payment period of 35 days, an average collection
period of 27 days and a cash conversion cycle of 16 days. what is the companys average
age of inventory?
a.51 days
b.43 days
c.24 days
d.16 days
8) narrbegin: competitive mesh shirts
competitive mesh shirts
competitive mesh shirts is considering a plan to ease its credit terms in order to generate
greater revenues. last year, competitive had sales of 1,000,000 units at a price and
variable cost of $20 and $15, respectively. its current average collection period is 20
days and its percentage of bad debt expense is 2% while it required return on
investment is 10%. if competitive were to ease its credit terms, the firm anticipates that
its sales would increase to 1,200,000 units without a change in price or variable costs.
however, the average collection period is expected to increase to 30 days and bad debt
expense is expected to increase to 3%.
narrend
what is competitives expected increase in bad debt expense?
a.$720,000
b.$400,000
c.$320,000
d.there is not enough information given
9) emma international has earnings per share of $3.29; just paid dividend $1.25 and
expects a roi next year (and the foreseeable future) of 14%. if the appropriate discount
rate is 20% what is the intrinsic value of the stock?
a.$25.540
b.$12.002
c.$11.043
d.not enough information
10) a machine costs $3 million and has zero salvage value. assume a discount rate of
10% and a 40% tax rate. the machine is depreciated straight-line over 3 years for tax
purpose. what is the present value of depreciation tax savings associated with this
machine?
a.$1,200,000
b.$994,741
c.$1,090,900
d.$400,000
11) the firm needs to manage its accounts payable in a fashion that
a.lengthens the payment period
b.preserves the firms credit reputation
c.both a and b
d.neither a nor b
