How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Manal Elkhoshkhany Your Own Question

Manal Elkhoshkhany
Manal Elkhoshkhany, Tutor
Category: Homework
Satisfied Customers: 9808
Experience:  More than 5000 online tutoring sessions.
Type Your Homework Question Here...
Manal Elkhoshkhany is online now
A new question is answered every 9 seconds

1) 1. Bluegrass Distilleries, Inc. refuses to extend credit

This answer was rated:

1) 1. Bluegrass Distilleries, Inc. refuses to extend credit to any wholesale distributors who have a history of being delinquent in repaying credit extended to them. This policy results in lost sales of $10 million annually. Based on past experience with these types of customers, the firm estimates that the average collection period would be 90 days and that the bad-debt loss ratio would be 6 percent. The firm’s variable cost ratio is 0.80, making its profit contribution ratio 0.20. Bluegrass Distilleries’ required pretax return (i. e. opportunity cost) on receivables investments is 20 percent. When converting from annual to daily or vice versa, assume there are 365 days per year. If Bluegrass Distilleries extends credit to these (previously delinquent) customers, determine the increase in the investment in receivables.

2) An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm’s cost of capital is 12 percent. Determine the internal rate of return for the project.

3) Quorex is evaluating two mutually exclusive projects. Project A has a net investment of $48,000 and net cash flows over a six year period of $12,500 per year. Project B also has a net investment of $48,000 but its net cash flows of $8,640 per year will occur over a 12 year period. If Quorex has a cost of capital of 14% for these projects, which project, if either, should be chosen and what is its NPV?

4) 10. Bay State Technology has determined that its cost of equity is 15% and its after-tax cost of debt is 7.2%. Bay State expects to earn $14 million after taxes next year and, as a new firm, does not pay dividends. The stock sells for $24. Bonds are currently selling at par value. Compute Bay State’s weighted average cost of capital (WACC). A partial balance sheet is shown below:

Current liabilities $ 300,000
Long-term debt 1,000,000
Common Stock at $1 par 100,000
Paid-in capital 900,000
Retained earnings 3,000,000
Total liabilities and stock-
holder’s equity $5,300,000

Please show work. Thanks

You need to spend $3 to view this post. Add Funds to your account and buy credits.
Manal Elkhoshkhany and 2 other Homework Specialists are ready to help you

Related Homework Questions