Chapter 17
Problem 03
Input Area:
Business Assets
Annual revenue and Expense
Items
Cash account 60.00 Net sales 600.00
Accounts receivable 155.00 Cost of goods sold 445.00
Inventories 128.00 Wages and salaries 52.00
Fixed assets 286.00 Interest expense 28.00
Miscellaneous assets 96.00 Overhead expenses 29.00
Total assets 725.00 Depreciation expenses 12.00
Liabilities and Equity
Selling, administrative, and other
expenses
28.00
Short-term debt: Before-tax net income 6.00
Accounts payable 108.00 Taxes owed 1.00
Notes payable* 117.00 After-tax net income 5.00
Long-term debt (bonds)* 325.00
Miscellaneous liabilities 15.00
marginal tax rate 35.00%
Output Area:
Expense Control Ratios Profitability Measures
Coverage Ratios Liquidity Indicators
Operating Efficiency Measures Net liquid assets -10.00
worth
Marketability Indicators
Chapter 17
Problem 04
Input Area:
Assets (t-1)
Assets
(t)
Liabilities &
Equity (t-1)
Liabilities &
Equity (t)
Cash 532 600 Accounts payable 970 1,069
Accounts receivable 1,018 1,210 Notes payable 2,733 2,930
Inventories 894 973 Taxes payable 327 216
Net fixed assets 2,740 2,940
Long-term debt obligations
872 1,072
Other assets 66 87 Common Stock 85 85
Total assets 5,250 5,810 Undivided profits 263 438
5,250 5,810
Additional Information
Net income (t) 210
dividends (t) 50
depreciation expense (t) 100
planned expansions (t) 300
Output Area:
Pro forma Statement of Cash Flows
Cash flows from operations
Net Income 210
Depreciation 100
Change in accounts rec. 192
Change in inventory 79
Change in other assets 21
Change in accounts pay 99
Change in taxes -111
Net cash flow from operations 6
Cash flows from Investment Activities
Acquisition of fixed assets -300
Net cash flow form investment activities -300
Cash flows from Financing Activities
Change in notes payable 197
change in long-term debt 200
Dividends paid -50
Net cash flows from financing activities 347
Change in Cash 53
Chapter 17
Problem 05
Input Area:
Term for loan (years) 1
Amount of loan 10,000,000
Annual interest rate of loan 6.00%
Amount of CD 3,000,000
CD interest rate 2.75%
Loan commitment fee 0.75%
Cash management fees 3.00%
Average annual amount of cash managed 15,000,000
Recommended before tax rate of return over all costs 4.00%
Expected cost of additional funds need to support loan 4.00%
Labor costs and other operating expenses associated with
monitoring the cusomer’s loan
2.00%
Cost of processing the loan 1.50%
Output Area:
Estimated Revenues:
Interest Income from loan 600,000
Loan commitment fees 75,000
Cash management fees 450,000
Total Revenues 1,125,000
Estimated Expenses
Interest to be paid on customers CD 82,500
Labor costs and other operating expenses associated with
monitoring the cusomer’s loan
Total Revenues – Total Costs 292,500
Chapter 17
Problem 06
Input Area:
Interest Income
$ Amount of line of credit 10,000,000
Term (months) 6
Annualized interest rate on line of crdt 4.00%
Interest Cost
Average deposit balance 2,125,000
Annualized interest rate on deposit bal 2.50%
Expected Revenues
Loan commitment fee (1%) 100,000
Deposit management fees 4,500
Wire transfer fees 3,500
Fees for agency services 4,500
Expected Costs
Cost of other funds raised 180,000
Account activity costs 5,000
Wire transfer costs 1,300
Loan processing costs 12,400
Recordkeeping costs 4,500
Output Area:
Expected Revenues
Interest income from loan (4%, 9 mo,) 200,000
Total Revenues 312,500
Expected Costs
Chapter 17
Problem 07
Input Area:
$ Amount of loan 10,000,000
Term of loan (years) 1
$ Amount of negotiable CDs 6,000,000
Annual yield on CDs 2.75%
$ Amount of Fed Funds borrowed 4,000,000
Interest rate on Fed Funds 2.80%
Credit investigation & record keeping costs 25,000
Risk premium 1.00%
Profit margin 0.25%
Output Area:
Total $ Interest Costs 277,000
Interest Costs as % 2.77%
Non-Interest Costs as % 0.25%
Loan rate calculated using cost plus pricing 4.27%
Chapter 17
Problem 10
Input Area:
Average deposit balance for month 325,000
Estimate float included in balance 50,000
Required legal reserves 3.00%
Annual interest return 2.25%
Output Area:
$ Amount of net investable funds 266,750.00
$ Earnings credit 500.16