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Explain how its investments in municipal bonds and REITs could reduce a bank's willingness to act as a lessor.
In our Anderson Company example, we assumed that the lease could not be cancelled. What effect would a cancellation clause have on the lessee's analysis?
Discuss how each of these potential changes would affect the relative volume of leasing versus conventional debt in the U.S. economy.
What would be the company's debt ratio if it purchased the equipment?
Assume that Reynolds's tax rate is 40 percent and the equipment's depreciation would be $100 per year.
Assume that Big Sky Mining will continue to use the machine beyond the expiration of the lease and must purchase it at an estimated residual value of $250,000.
Show how Hastings's balance sheet would look immediately after the financing if it capitalized the lease.
If the money is borrowed, the bank loan will be at a rate of 14 percent, amortized in 3 equal installments at the end of each year .
Define the conversion ratio, conversion price, conversion value.
If a firm expects to have additional financial requirements in the future, would you recommend that it use convertibles or bonds with warrants?
How does a firm's dividend policy affect the value of its long-term warrants.
Peterson Securities recently issued convertible bonds with a $1,000 par value. The bonds have a conversion price of $40 a share.
Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight debt with an 8 percent annual coupon.
What conversion price should be set by the issuer? The conversion ratio will be 1.0; that is, each share of convertible preferred can be converted.
What is Roop's annual interest savings on the convertible issue versus a straight-debt issue?
If a firm buys under terms of 3/15, net 45, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade.
What are the two principal reasons for holding cash? Can a firm estimate its target cash balance by summing the cash held to satisfy each of the two reasons?
What are the advantages of matching the maturities of assets and liabilities? What are the disadvantages?
Is it true that most firms are able to obtain some free trade credit and that additional trade credit is often available, but at a cost? Explain.
The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover.
Medwig Corporation has a DSO of 17 days. The company averages $3,500 in credit sales each day. What is the company's average accounts receivable?
A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day
What would happen to average receivables if McDowell toughened up on its collection policy with the result that all nondiscount customers paid on the 30th day.
What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers?
The D.J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new store.