A firm seeks to obtain a loan. Assume that it will invest the loan in Fixed...

 

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A firm seeks to obtain a loan. Assume that it will invest the loan in Fixed Assets. The firm has the following financial statements on 12/31/2016: Income Statement Revenues Cost of Goods Sold Other Expenses Depreciation EBIT Interest Expense Taxable Income Taxes Net Income EPS Dividends per share 2016 5,000 (2,006) (1,740) (116) 1,138 (7) 1,131 (442) 689 3.61 1.08 Assets 2016 Cash 696 A/R 956 35% 55% 2.2 1.1 0.3 10% Inventory Total CA Net Fixed Assets Total Assets | Assume that the following ratios are standard in this industry: Long Term Debt Ratio Total Debt Ratio Balance Sheet 2015 58 604 2,256 1,675 Current Ratio Quick Ratio Cash Ratio Interest Rate on a Bank Loan 992 625 3,138 3,358 5,394 5,033 Liab & Equity 2016 A/P 307 1,668 1,995 843 906 Notes Payable Total CL LT Debt Com. Shares Retained Earnings Total Liab & Equity I 2015 303 1,472 1,775 1,091 1,000 1,650 1,167 5,394 5,033 a) What is the maximum amount that the firm should be able to obtain for a 5-day loan? b) What is the maximum amount that the firm should be able to obtain for a 45-day loan? c) What is the maximum amount that the firm should be able to obtain for a 90-day loan? d) What is the maximum amount that the firm should be able to obtain for a 2 year loan? e) What is the maximum amount that the firm should be able to obtain for a 10 year loan? A firm seeks to obtain a loan. Assume that it will invest the loan in Fixed Assets. The firm has the following financial statements on 12/31/2016: Income Statement Revenues Cost of Goods Sold Other Expenses Depreciation EBIT Interest Expense Taxable Income Taxes Net Income EPS Dividends per share 2016 5,000 (2,006) (1,740) (116) 1,138 (7) 1,131 (442) 689 3.61 1.08 Assets 2016 Cash 696 A/R 956 35% 55% 2.2 1.1 0.3 10% Inventory Total CA Net Fixed Assets Total Assets | Assume that the following ratios are standard in this industry: Long Term Debt Ratio Total Debt Ratio Balance Sheet 2015 58 604 2,256 1,675 Current Ratio Quick Ratio Cash Ratio Interest Rate on a Bank Loan 992 625 3,138 3,358 5,394 5,033 Liab & Equity 2016 A/P 307 1,668 1,995 843 906 Notes Payable Total CL LT Debt Com. Shares Retained Earnings Total Liab & Equity I 2015 303 1,472 1,775 1,091 1,000 1,650 1,167 5,394 5,033 a) What is the maximum amount that the firm should be able to obtain for a 5-day loan? b) What is the maximum amount that the firm should be able to obtain for a 45-day loan? c) What is the maximum amount that the firm should be able to obtain for a 90-day loan? d) What is the maximum amount that the firm should be able to obtain for a 2 year loan? e) What is the maximum amount that the firm should be able to obtain for a 10 year loan?

Answer rating: 100% (QA)

To determine the maximum amount that the firm should be able to obtain for each loan term we need to ... View the full answer