FINA Inc produces a line of hydraulic jacks that it sells to industrial construction companies. They produce

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Question:

FINA Inc produces a line of hydraulic jacks that it sells to industrial construction companies. They produce 40 of these jacks each month, at a cost of $1,200 per jack. At the beginning of February 2021, they had 19 jacks unsold, in the warehouse. In February they produced the usual number of jacks and sold 34 of them. What was the ending inventory in Feb 21 and what was the cost to finance this inventory, assuming an annual percentage rate of 6% on short term debt for FINA Inc?

2. If FINA Inc extends 30 day open book credit to all customers, what was the additional financing cost for that credit on the jacks sold in February but not paid for until March?

3. FINA Inc has a policy of maintaining at least $50,000 in cash in their checking account, to reduce risk and maintain a favorable Current Ratio, as that is considered important to their investors. They earn 1% annual interest on the funds in their checking account. This year, they financed $13 million in working capital at a short term cost of debt of 6%. What is the cost to finance the cash in their checking account?

4. FINA Inc, a corporation operating in the United States, pays a market interest rate on its debt of 6% annually. This year, the CFO has decided to raise operating capital using 80% debt and 20% equity. The cost of equity is estimated at 8%. Calculate FINA Inc's 2021 WACC.

5. In 2021, FINA Inc has an opportunity to install additional insulation in its primary factory. It will cost $300,000 to install this insulation. It is expected to save the company $41,000 annually in heating costs for the next ten years. Calculate the Return on Investment for this, using a WACC of 4%. Would you recommend that FINA Inc install the insulation, based on your financial analysis? Why/why not?