MLX has annual sales of $320 million per year and has calculated the collection float to...

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MLX has annual sales of $320 million per year and has calculated the collection float to be 12 days. If MLX is currently paying 9.35 % on its line of credit, what amount of interest expense could be saved if the collection float is reduced by 3 days? (Assume 365 days per year.) (3 marks) b) Ace Corp has sales for the second quarter of $2M, $3M and $5m per month All sales are on credit terms 2/10 net 40. Only a small proportion of customers (10%) pay early enough to earn the 2% discount. Most customers (70 %) pay in the month following purchase with the remaining 20% paying in the second month following purchase. It obtains 30 days credit from its suppliers and purchases usually amount to 70 % of the current month's sales. Taxes ($0.75M) must be paid in the third month of the quarter. Other expenses are (i) wages @ 15% of current month's sales (ii) interest on debt (50.5M), and other expenses @10% of current month's sales. Construct a cash budget for third month of the second quarter. Does the firm have a cash surplus or deficit ? Y (7 marks) c) Haulsee Inc. builds 800,000 golf carts a year and purchases the electronic motors for these carts for $370 each. Ordering costs are $540, and Haulsee's inventory average 14% of the inventory value. carrying costs What is the EOQ for Haulsee? (3 marks) d) Alpha Products maintains a capital structure of 40% debt and 60% common equity. To finance its capital budget for next year, the firm will sell $50 million of 11% debentures at par and finance the balance of its $125 million capital budget with retained earnings. Next year Alpha expects net income to grow 7% to $140 million, and dividends also are expected to increase 7% to 51.40 per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40%, what is its weighted cost of capital for the coming year? MLX has annual sales of $320 million per year and has calculated the collection float to be 12 days. If MLX is currently paying 9.35 % on its line of credit, what amount of interest expense could be saved if the collection float is reduced by 3 days? (Assume 365 days per year.) (3 marks) b) Ace Corp has sales for the second quarter of $2M, $3M and $5m per month All sales are on credit terms 2/10 net 40. Only a small proportion of customers (10%) pay early enough to earn the 2% discount. Most customers (70 %) pay in the month following purchase with the remaining 20% paying in the second month following purchase. It obtains 30 days credit from its suppliers and purchases usually amount to 70 % of the current month's sales. Taxes ($0.75M) must be paid in the third month of the quarter. Other expenses are (i) wages @ 15% of current month's sales (ii) interest on debt (50.5M), and other expenses @10% of current month's sales. Construct a cash budget for third month of the second quarter. Does the firm have a cash surplus or deficit ? Y (7 marks) c) Haulsee Inc. builds 800,000 golf carts a year and purchases the electronic motors for these carts for $370 each. Ordering costs are $540, and Haulsee's inventory average 14% of the inventory value. carrying costs What is the EOQ for Haulsee? (3 marks) d) Alpha Products maintains a capital structure of 40% debt and 60% common equity. To finance its capital budget for next year, the firm will sell $50 million of 11% debentures at par and finance the balance of its $125 million capital budget with retained earnings. Next year Alpha expects net income to grow 7% to $140 million, and dividends also are expected to increase 7% to 51.40 per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40%, what is its weighted cost of capital for the coming year?

Answer rating: 100% (QA)

a To calculate the interest expense saved by reducing the collection float by 3 days we need to first calculate the current daily interest expense on the line of credit Current daily interest expense ... View the full answer