...A. Which loan carries the lower effective rate? Consider fees to be the equivalent of other interest. $500,000 * 8.25% = $41,250 Interest $500,000 * 20% = $400,000 Available Effective rate would be $41,250 / $400,000 = 10.312% Fee added loan - $500,000 * 9.75% = $48,750 Interest Effective rate - $54,250 / $500,000 = 10.850% B. If the loan with a 20 percent compensating balance requirement were to be paid off in 12 monthly payments, what would the effective rate be? (Principal equals amount borrowed minus the compensating balance.) (2 * 12 * $41,250) / (12 + 1) * $400,000 $990,000 / 5,200,000 = 19.038% (Order or operation) C. Assume the proceeds from the loan with the compensating balance requirement will be used to take cash discounts. Disregard part babout installment payments and use the loan cost from part a. If the terms of the cash discount are 1.5/10, net 50, should the firm borrow the funds to take the discount? (1.5% / 98.5%) * 360 / (50-10) 1.52% * 9 = 13.680% Cost of dialing to take cash discount = 13.680% D. Assume the firm actually takes 80 days to pay its bills and would continue to do so in the future if it did not take the cash discount. Should it take the cash discount? 1.5% / 98.5% * 360 / 70 1.52% * 5.14 = 7.813% E. Because the interest rate on the loans is floating, it can go up as interest rates go up. Assume that the prime rate goes up by 2 percent and the quoted rate on the loan goes up the same...
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...FIN200 Corporate Finance (2nd Term 2012-2013) Solution for Corporate Finance, Ross, Westerfield, and Jaffe, 9th edition CHAPTER 20 ISSUING SECURITIES TO THE PUBLIC Answers to Concepts Review and Critical Thinking Questions 1. A company’s internally generated cash flow provides a source of equity financing. For a profitable company, outside equity may never be needed. Debt issues are larger because large companies have the greatest access to public debt markets (small companies tend to borrow more from private lenders). Equity issuers are frequently small companies going public; such issues are often quite small. Additionally, to maintain a debt-equity ratio, a company must issue new bonds when the current bonds mature. From the previous question, economies of scale are part of the answer. Beyond this, debt issues are simply easier and less risky to sell from an investment bank’s perspective. The two main reasons are that very large amounts of debt securities can be sold to a relatively small number of buyers, particularly large institutional buyers such as pension funds and insurance companies, and debt securities are much easier to price. They are riskier and harder to market from an investment bank’s perspective. Yields on comparable bonds can usually be readily observed, so pricing a bond issue accurately is much less difficult. It is clear that the stock was sold too cheaply, so Eyetech had reason to be unhappy. No, but, in fairness, pricing the stock in such a situation...
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...Financial Forecasting Amy Spangler FIN/200 June 15, 2012 University of Phoenix Financial Forecasting Financial Forecasting Checkpoint The most comprehensive means of financial forecasting is to develop a series of pro forma, or projected, financial statements. Based on the projected statements, any firm is able to estimate its future level of Receivables inventory, payables, and other corporate accounts as well as its anticipated profits and borrowing requirements. A brand new company needs to have a sales projection plan, production plan, to put together a pro forma income statement a new company doesn’t have a prior balance sheet, a income statement, cash balance sheet and other budgets plans would be used to secure operating capital and loans from the bank. I as a new company would need to know how much product we need to make, how much each item cost to make, and how much revenue is expected. A family owned company is in the same boat, sales projection, production plan, cash balance and any other plans are needed in this situation. I really don’t see any difference in this situation then a new business. Knowing a family business has a sales plan and budget sheets, is necessary to get lending from the bank and for planning on how to pay personal monthly bills. A long standing company is no different, and then the previous two companies otherwise it would be long standing. Pro forma income statements, cash budget, and other budgets used together equal a pro forma balance sheet...
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...Accredited Tertiary Courses Listing 2012 Accredited Tertiary Courses Listing 2012 – as at 26 September 2012 1 2012 Accredited Undergraduate Courses AUSTRALIAN CAPITAL TERRITORY The Australian National University University of Canberra NEW SOUTH WALES Australian Catholic University Australian Institute of Higher Education Avondale College Charles Sturt University Kings Own Institute Macquarie University Southern Cross University Top Education Institute The University of New England The University of New South Wales The University of Newcastle The University of Sydney University of Technology, Sydney University of Western Sydney University of Wollongong Williams Business College NORTHERN TERRITORY Charles Darwin University QUEENSLAND Australian Catholic University Bond University Central Queensland University Christian Heritage College Griffith University James Cook University Queensland University of Technology The University of Queensland The University of Southern Queensland University of the Sunshine Coast SOUTH AUSTRALIA Flinders University Kaplan Business School The University of Adelaide University of South Australia Open Universities (conferred by Uni of SA) TASMANIA University of Tasmania VICTORIA Australian Catholic University Cambridge International College Carrick Higher Education Deakin University Holmes Institute Holmesglen Institute of TAFE La Trobe University Melbourne Institute of Technology Monash University Northern Melbourne Institute of TAFE RMIT...
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...2012 Catalog Volume 20 Issue 1 March 5, 2012 – December 31, 2012 This Catalog contains information, policies, procedures, regulations and requirements that were correct at the time of publication and are subject to the terms and conditions of the Enrollment Agreement entered into between the Student and ECPI University. In keeping with the educational mission of the University, the information, policies, procedures, regulations and requirements contained herein are continually being reviewed, changed and updated. Consequently, this document cannot be considered binding. Students are responsible for keeping informed of official policies and meeting all relevant requirements. When required changes to the Catalog occur, they will be communicated through catalog inserts and other means until a revised edition of the Catalog is published. The policies in this Catalog have been approved under the authority of the ECPI University Board of Trustees and, therefore, constitute official University policy. Students should become familiar with the policies in this Catalog. These policies outline both student rights and student responsibilities. The University reserves the right and authority at any time to alter any or all of the statements contained herein, to modify the requirements for admission and graduation, to change or discontinue programs of study, to amend any regulation or policy affecting the student body, to increase tuition and fees, to deny admission, to revoke an offer...
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