Liberty University BUSI 320 connect homework 3 correct answers 100% guaranteed with explanations

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Liberty University BUSI 320 connect homework 3 correct answers 100%guaranteedwith explanationsSharpe Knife Company expects sales next year to be $1,720,000 if the economy is strong, $910,000 if the economy is steady, and$720,000 if the economy is weak. Mr. Sharpe believes there is a 10 percent probability the economy will be strong, a 45 percent probabilityof a steady economy, and a 45 percent probability of a weak economy.What is the expected level of sales for the next year?Antivirus Inc. expects its sales next year to be $2,200,000. Inventory and accounts receivable will increase by$450,000 to accommodatethis sales level. The company has a steady profit margin of 9 percent with a 20 percent dividend payout.Bambino Sporting Goods makes baseball gloves that are very popular in the spring and early summer season. Units sold areanticipated as follows:What is the ending inventory at the end of each month? Compare the unit sales to the units produced and keep a running totalIf the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and thetotal for the four months?Biochemical Corp. requires $580,000 in financing over the next three years. The firm can borrow the funds for three years at12.90percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short-term financing instead, she will pay9.75 percent interest in the first year, 14.50 percent interest in the second year, and 10.90 percent interest in the third year. Assumeinterest is paid in full at the end of each yearDetermine the total interest cost under each planWhich plan is less costlySauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $440,000. Thecompany can borrow $440,000 for three years at 14 percent annual interest or for one year at 12 percent annual interest. Assumeinterest is paid in full at the end of each year.How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilizedand the loan is rolled over (reborrowed) each year at the same 12 percent rate? Compare this to the 14 percent three-year loanWhat if interest rates on the 12 percent loan go up to 18 percent in year 2 and 21 percent in year 3? What would be the totalinterestcost compared to the 14 percent, three-year loan?Assume that Hogan Surgical Instruments Co. has $4,100,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn areturn of 14 percent, but with a high-liquidity plan, the return will be 10 percent. If the firm goes with a short-term financing plan, thefinancing costs on the $4,100,000 will be 6 percent, and with a long-term financing plan, the financing costs on the $4,100,000 will be 8percentCompute the anticipated return after financing costs with the most aggressive asset-financing mixCompute the anticipated return after financing costs with the most conservative asset-financing mixCompute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.Assume that Atlas Sporting Goods Inc. has $1,010,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of18 percent, but with a high-liquidity plan the return will be 15 percent. If the firm goes with a short-term financing plan, the financingcosts on the $1,010,000 will be 12 percent, and with a long-term financing plan, the financing costs on the $1,010,000 will be 14 percentCompute the anticipated return after financing costs with the most aggressive asset-financing mixCompute the anticipated return after financing costs with the most conservative asset-financing mixCompute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.If the firm used the most aggressive asset-financing mix described in partaand had the anticipated return you computed for parta,what would earnings per share be if the tax rate on the anticipated return was 30 percent and there were 20,000 shares outstandingShort-term rates are 12 percent. Long-term rates are 17 percent. Earnings before interest and taxes are $1,200,000. The tax rate is 40percentAssume the term structure of interest rates becomes inverted, with short-term rates going to 14 percent and long-term rates 4percentage points lower than short-term rates. Earnings before interest and taxes are $1,190,000. The tax rate is 30 percentIf long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, whatwill earnings after taxes be?Guardian Inc. is trying to develop an asset-financing plan. The firm has $440,000 in temporary current assets and $340,000 inpermanent current assets. Guardian also has $540,000 in fixed assets. Assume a tax rate of 30 percentConstruct two alternative financing plans for Guardian. One of the plans should be conservative, with 60 percent of assets financed bylong-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. The currentinterest rate is 11 percent on long-term funds and 6 percent on short-term financing. Compute the annual interest payments under eachplanGiven that Guardian’s earnings before interest and taxes are $320,000, calculateearnings after taxes for each of your alternatives.What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short-term and long-term interest rates were reversed?Lear Inc. has $900,000 in current assets, $400,000 of which are considered permanent current assets. In addition, the firm has$700,000 invested in fixed assetsLear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 8 percent. The balancewill be financed with short-term financing, which currently costs 5 percent. Lear’s earnings before interest and taxes are $300,000.Determine Lear’s earnings after taxes under this financing plan. The tax rate is 30 percentAs analternative, Lear might wish to finance allfixed assets and permanent current assets plus half of its temporary current assets withlong-term financing and the balance with short-term financing. The same interest rates apply as in parta. Earnings before interest andtaxes will be $300,000. What will be Lear’s earnings after taxes? The tax rate is 30 percentUsing the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities withmaturities of two, three, and four years based on the following dataCarmen’s Beauty Salon has estimated monthly financing requirements for the next six months as followsCompute total dollar interest payments for the six monthsCompute the total dollar interest payments if long-term financing at 12 percent had been utilized throughout the six monthsIf long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger orsmaller than with the short-term financing plan?Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows:What long-term interest rate would represent a break-even point between using short-term financing and long-term financingBombs Away Video Games Corporation has forecasted the following monthly salesConstruct a monthly production and inventory schedule in units. Beginning inventory in January is 41,000 units.Prepare a monthly schedule of cash receipts. Sales in December before the planning year are $100,000Prepare a cash payments schedule for January through December. The production costs of $2 per unit are paid for in the monthinwhich they occur. Other cash payments, besides those for production costs, are $61,000 per month

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Prepare a monthly cash budget for January through December using the cash receipts schedule from partband the cash paymentsschedule from partc. The beginning cash balance is $5,000, which is also the minimum desiredNeon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that throughthe establishment of local collection centers around the country, she can speed up the collection of payments by two days. Furthermore,the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half daywithout affecting suppliers. The bank has a remote disbursement center in FloridaIf Neon Light Company has $3.15 million per day in collections and $1.23 million per day in disbursements, how many dollars will thecash management system free upIf Neon Light Company can earn 8 percent per annum on freed-up funds, how much will the income be?If the total cost of the new system is $490,000, should it be implementedPostal Express has outlets throughout the world. It also keeps funds for transactions purposes in many foreign countries. Assume in2010 it held 400,000 reals in Brazil worth 330,000 dollars. It drew 14 percent interest, but the Brazilian real declined 28 percent againstthe dollarWhat is the value of its holdings, based on U.S. dollars, at year-endWhat is the value of its holdings, based on U.S. dollars, at year-end if instead it drew 11 percent interest and the real went up by 15percent against the dollar?Mervyn’s Fine Fashions has an average collection period of 35 days. The accounts receivable balance is $56,000What is the value of its annual credit salesRoute Canal Shipping Company has the following schedule for aging of accounts receivable:Calculate the percentage of amount duefor each monthIf the firm had $1,452,000 in credit sales over the four-month period, compute the average collection period. Average daily sales shouldbe based on a 120-day periodIf the firm likes to see its bills collected in 31 days, should it be satisfied with the average collection periodDisregarding your answer to partcand considering the aging schedule for accounts receivable, should the company be satisfiedFisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores.Fiskanticipates sales of 84,500 units per year, an ordering cost of $4 per order, and carrying costs of $1.60 per unitWhat is the economic ordering quantityWhat will the average inventory be?What is the total cost of ordering and carrying inventoryDiagnostic Supplies has expected sales of 120,000 units per year, carrying costs of $6 per unit, and an ordering cost of $9 per order.What is the economic ordering quantityWhat will the new average inventory beWisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level production,andaftertax costs would decline by $31,900, but inventory would increase by $290,000. Wisconsin Snowmobile would have to financetheextra inventory at a cost of 12.5 percentDetermine the extra cost or savings of switching over to level productionShould the company go ahead and switch to level productionJohnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by$146,000 if credit is extended to these new customers. Of the new accounts receivable generated, 8 percent will prove to beuncollectible. Additional collection costs will be 6 percent of sales, and production and selling costs will be 72 percent ofsales. The firmis in the 10 percent tax bracket.Compute the incremental income after taxesWhat will Johnson’s incremental return on sales be if these new credit customers are acceptedHenderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 8 percent of the newaccounts willbe uncollectible. Collection costs are 3percent of new sales, production and selling costs are 80 percent, and the accounts receivableturnover is five times. Assume income taxes of 35 percent and an increase in sales of $82,000. No other asset buildup will berequiredto service the new accountsWhat additional investment in accounts receivable is needed to support this sales expansionWhat would be the total incremental investment in accounts receivable and inventory needed to support a $82,000 increase in salesFast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide$324,000 inadditional credit sales, 12 percent are likely to be uncollectible. The company will also incur $17,000 in additional collection expense.Production and marketing costs represent 72 percent of sales. The firm is in a 35 percent tax bracket and has a receivables turnover offour times. No other asset buildup will be required to service the new customers. The firm has a 8 percent desired returnCalculate the incremental income after taxesCalculate theincremental income after taxes if 15 percent of the new sales prove to be uncollectibleDome Metals has credit sales of $360,000 yearly with credit terms of net 45 days, which is also the average collection period. Domedoes not offer a discount for early payment, so its customers take the full 45 days to payWhat is the average receivables balanceWhat is the receivables turnoverDome Metals has credit sales of $216,000 yearly with credit terms of net 45 days, which is also the average collection period. Assumethe firm adopts new credit terms of 2/15, net 45 and all customers pay on the last day of the discount period. Any reductionin accountsreceivable will be used to reduce the firm's bank loan which costs 9 percent. The new credit terms will increase sales by 10percentbecause the discount will make the firm's price competitiveIf Dome earns 20 percent on sales before discounts, what will be the net change in income if the new

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1.award:1 out of1.00 pointSharpe KnifeCompany expects sales next year to be $1,720,000 if the economy is strong, $910,000 ifthe economy is steady, and $720,000 if the economy is weak. Mr. Sharpe believes there is a 10 percentprobability the economy will be strong, a 45 percent probability of a steady economy, and a 45 percentprobability of a weak economy.What is the expected level of sales for the next year?Expected level of sales$905,500 ± 0.1%rev: 03_07_2014_QC_46438Explanation:Sharpe Knife CompanyState ofEconomySalesProbabilityExpectedOutcomeStrong$1,720,000.10$172,000Steady910,000.45409,500Weak720,000.45324,000Expected level of sales=$905,5002.award:1 out of1.00 pointAntivirus Inc. expects its sales next year to be $2,200,000. Inventory and accounts receivable willincrease by$450,000 to accommodate this sales level. The company has a steady profit margin of 9percent with a20 percent dividend payout.How much external financing will the firm have to seek? Assume there is no increase in liabilities otherthan that which will occur with the external financing.External funds needed$291,600 ± 0.1%Explanation:Net income =.09 × $2,200,000 = $198,000Dividends = .20 × $198,000 = $39,600Net$198,000

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incomeLess:Dividends39,600Increasein retainedearnings$158,400Increase inassets$450,000Less:Increasein retainedearnings158,400External fundsneeded$291,6003.award:0.56 out of1.00 pointBambino Sporting Goods makes baseball gloves that are very popular in the spring and early summerseason.Units sold are anticipated as follows:March3,650April7,650May12,300June10,30033,900If seasonal production is used, it is assumed that inventory will directly match sales for each month andthere will be no inventory buildup.The production manager thinks the preceding assumption is too optimistic and decides to go with levelproduction to avoid being out of merchandise. He will produce the 33,900 units over four months at alevel of8,475 per month.a.What is the ending inventory at the end of each month? Compare the unit sales to the units producedand keep a running total.(Leave no cells blank-be certain to enter "0" wherever required.)Ending

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InventoryMarch4,825 ± 0.1%unitsApril5,650 ± 0.1%unitsMay1,825 ± 0.1%unitsJune0unitsb.If the inventory costs $12 per unit and will be financed at the bank at a cost of 12 percent, what is themonthly financing cost and the total for the four months? (Use1.0 percent as the monthlyrate.)(Leave no cells blank-be certain to enter "0" wherever required.)InventoryFinancing CostMarch$579 ± 1%April678 ± 1%May219 ± 1%June0Total financing cost$1,476 ± 1%Explanation:a.Bambino Sporting GoodsUnitsSoldUnitsProducedChange inInventoryEndingInventoryUnitsMarch3,6508,4754,8254,825April7,6508,4758255,650May12,3008,475–3,8251,825June10,3008,475–1,8250b.Bambino Sporting GoodsEndingInventoryUnitsTotalCost($12 perunit)Inventory FinancingCost(at 1.0% per month)March4,825$57,900$579April5,65067,800678May1,82521,900219June000Total financing cost =$1,476

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4.award:1 out of1.00 pointBiochemical Corp. requires $580,000 in financing over the next three years. The firm canborrow thefunds for three years at 12.90 percent interest per year. The CEO decides to do a forecast and predictsthat if she utilizes short-term financing instead, she will pay 9.75 percent interest in the first year, 14.50percent interest in the second year, and 10.90 percent interest in the third year. Assume interest is paidin full at the end of each year.a.Determine the total interest cost under each plan.Interest CostLong-term fixed-rate$224,460 ± 0.1%Short-termvariable-rate$203,870 ± 0.1%b.Which plan is less costly?Short-term variable-rate planExplanation:a.Long-term fixed-rate interest cost = 3 × (.1290 × $580,000) = $224,460Short-term variable-rate interest cost:Year 1interest = .0975 × $580,000 = $56,550Year 2 interest = .1450 × $580,000 = $84,100Year 3 interest = .1090 × $580,000 = $63,220Total interest = $56,550 + 84,100 + 63,220 = $203,870b.The short-term variable-rate financing plan has the lower cost.5.award:1 out of1.00 pointSauer Food Company has decided to buy a new computer system with an expected life of three years.The cost is $440,000. The company can borrow $440,000 for three years at 14 percent annual interest orfor one year at12 percent annual interest. Assume interest is paid in full at the end of each year.a.How much would Sauer Food Company save in interest over the three-year life of the computersystem if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same12 percent rate? Compare this to the 14 percent three-year loan.

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Interest12 percent loan$158,400 ± 0.1%14 percent loan$184,800 ± 0.1%Interest savings$26,400 ± 0.1%b.What if interest rates on the 12 percent loan goup to 18 percent in year 2 and 21 percent in year 3?What would be the total interest cost compared to the 14 percent, three-year loan?InterestFixed-rate 14% loan$184,800 ± 0.1%Variable-rate loan$224,400 ± 0.1%Additional interest cost$39,600 ± 0.1%Explanation:a.12% fixed-rate interest cost = 3 × (.12 × $440,000) = $158,40014% fixed-rate interest cost = 3 × (.14 × $440,000) = $184,800Interest savings = $184,800−158,400 = $26,400b.14% fixed-rate interest cost = 3 × (.14 ×$440,000) = $184,800.Short-term variable-rate interest cost:Year 1 interest = .12 × $440,000 = $52,800Year 2 interest = .18 × $440,000 = $79,200Year 3 interest = .21 × $440,000 = $92,400Total interest = $52,800 + 79,200 + 92,400 =$224,400Additional interest cost = $224,400−184,800 = $39,6006.award:2 out of2.00 pointsAssume that Hogan Surgical Instruments Co. has $4,100,000 in assets. If it goes with a low-liquidity planfor the assets, it can earn areturn of 14 percent, but with a high-liquidity plan, the return will be 10percent. If the firm goes with a short-term financing plan, the financing costs on the $4,100,000 will be 6percent, and with a long-term financing plan, the financing costs on the $4,100,000 will be 8 percent.a.Compute the anticipated return after financing costs with the most aggressive asset-financing mix.Anticipated return$328,000 ± 0.1%

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b.Compute the anticipated return after financing costs with the mostconservative asset-financing mix.Anticipated return$82,000 ± 0.1%c.Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.Anticipated ReturnLow liquidity$246,000 ± 0.1%Highliquidity$164,000 ± 0.1%Explanation:a.Most aggressive:Lowliquidityreturn$4,100,000×.14=$574,000Short-termfinancingcost4,100,000×.06=–246,000Anticipatedreturn$328,000b.Most conservative:Highliquidityreturn$4,100,000×.10=$410,000Long-termfinancingcost4,100,000×.08=–328,000Anticipatedreturn$82,000c.Moderate approach:Lowliquidityreturn$4,100,000×.14=$574,000

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Long-termfinancingcost4,100,000×.08=–328,000$246,000Highliquidityreturn$4,100,000×.10=$410,000Short-termfinancingcost4,100,000×.06=–246,000$164,0007.award:3 out of3.00 pointsAssume that Atlas Sporting Goods Inc. has$1,010,000 in assets. If it goes with a low-liquidity plan forthe assets, it can earn a return of 18 percent, but with a high-liquidity plan the return will be 15 percent. Ifthe firm goes with a short-term financing plan, the financing costs on the $1,010,000 will be 12 percent,and with a long-term financing plan, the financing costs on the $1,010,000 will be 14 percent.a.Compute the anticipated return after financing costs with the most aggressive asset-financing mix.Anticipated return$60,600 ± 0.1%b.Compute the anticipated return after financing costs with the most conservative asset-financing mix.Anticipated return$10,100 ± 0.1%c.Compute the anticipated return after financing costs with the two moderate approaches to theasset-financing mix.Anticipated ReturnLow liquidity$40,400 ± 0.1%High liquidity$30,300 ± 0.1%d.If the firm used the most aggressive asset-financing mix described in partaand had the anticipatedreturn you computed for parta, what wouldearnings per share be if the tax rate on the anticipatedreturn was 30 percent and there were 20,000 shares outstanding?(Round your answer to 2decimal places.)Earnings per share$2.12 ± 1%

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e-1.Now assume the most conservativeasset-financing mix described in partbwill be utilized. The taxrate will be 30 percent. Also assume there will only be 5,000 shares outstanding. What will earningsper share be?(Round your answer to 2 decimal places.)Earnings per share$1.41 ± 1%e-2.Would the conservative mix have higher or lower earnings per share than the aggressive mix?LowerExplanation:a.Most aggressive:Low liquidity return$1,010,000×.18=$181,800Short-term financing cost1,010,000×.12=–121,200Anticipated return60,600b.Most conservative:High liquidity return$1,010,000×.15=$151,500Long-term financing cost1,010,000×.14=–141,400Anticipated return10,100c.Moderate approach:Low liquidity return$1,010,000×.18=$181,800Long-term financing cost1,010,000×.14=–141,400Anticipated return$40,400High liquidity return$1,010,000×.15=$151,500Short-term financing cost1,010,000×.12=–121,200Anticipated return$30,300d.Anticipated return$60,600

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Taxes (30%)18,180Earnings aftertaxes$42,420Shares20,000Earnings per share$2.12e-1.Anticipated return$10,100Taxes (30%)3,030Earnings aftertaxes$7,070Shares5,000Earnings per share$1.41e-2.The more conservative financing mix has lower earnings per share.8.award:2 out of2.00 pointsColter Steelhas $5,700,000 in assets.Temporarycurrentassets$3,400,000Permanentcurrentassets1,620,000Fixedassets680,000Totalassets$5,700,000Short-term rates are 12 percent.Long-term rates are 17 percent. Earnings before interest and taxes are$1,200,000. The tax rate is 40 percent.If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same istrue of short-termfinancing, what will earnings after taxes be?

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