The firm's average accounts receivable balance is P2.5 million, and they are financed by a bank loan at an 11% annual interest rate. The firm is considering setting up a regional lockbox system to speed up collections, and it believes this would reduce receivables by 20%. If the annual cost of the system is P15,000, what pre-tax net annual savings
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- The firm's average accounts receivable balance is P2.5 million, and they are financed by a bank loan at an 11% annual interest rate. The firm is considering setting up a regional lockbox system to speed up collections, and it believes this would reduce receivables by 20%. If the annual cost of the system is P15,000, what pre-tax net annual savings would be realized?P40,000P32,400P29,160P44,000P36,000The XYZ Co. needs an estimate of the present value of its future revenues to get a bank loan. Management expects XYZ Co, to post revenues of $250m in 4 years, $300m in 5 years, $360m in 6 years and $400m in 7 years. If the appropriate discount rate is 4% per year, what is the present value of XYZ Co.’s revenues?The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. If Sandbox gets a cash infusion of P1 million each time it needs cash, how much would be the average cash balance associated with its cash investment? 2. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the total costs per month associated its cash infusions?
- The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the transactions costs per month associated its cash infusions?The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the transactions costs per month associated its cash infusions? 2. If Sandbox gets a cash infusion of P1 million each time it needs cash, how many transactions would be associated with its cash investment?The Sandbox's Company has cash needs of P5 million per month. If Sandbox needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If Sandbox leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. 1. Using the Baumol model, how much would be the Sandbox’s minimum total costs associated with cash infusion? 2. If Sandbox gets a cash infusion of P1 million each time it needs cash, what are the holding costs associated with its cash investment? 3. Using the Baumol model, what level of cash infusion minimizes Sandbox’s costs associated with cash?
- Xader Manalastas predicts a cash requirement of P25,000 over a 1-month period in which cash is expected to be paid constantly. The opportunity interest rate is 12% per annum. The transaction cost associated with each borrowing or withdrawal is P10.a. What is the optimal transaction size? b. Since it is known how much is usually available to meet operating needs, What is the average cash balance?A firm needs $1.2 million in additional funds. These can be borrowed from a commercial bank with a loan at 7 percent for one year or from an insurance company at 9 percent for six years. The tax rate is 30 percent. What will be the firm's earnings under each alternative if earnings before interest and taxes (EBIT) are $415,000? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $ If EBIT will remain $415,000 next year, what will be the firm's earnings under each alternative if short-term interest rates are 5 percent? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $ If EBIT will remain $415,000 next year, what will be the firm's earnings under each alternative if short-term interest rates are 13 percent? Round your answers to the nearest dollar. Commercial bank: $ Insurance company: $The Real Company has cash needs of P5 million per month. If real needs more cash, it can sell marketable securities, incurring a fee of P300 for each transaction. If real leaves its funds in marketable securities, it expects to earn approximately 0.50% per month on their investment. If real gets a cash infusion of P1 million each time it needs cash, what are the total costs per month associated its cash infusions? If real gets a cash infusion of P1 million each time it needs cash, how many transactions would be associated with its cash investment? If real gets a cash infusion of P1 million each time it needs cash, what are the transactions costs per month associated its cash infusions? how much would be the real's minimum total costs associated with cash infusion? If realgets a cash infusion of P1 million each time it needs cash, how much would be the average cash balance associated with its cash investment? If real gets a cash infusion of P1 million each time it needs cash, what are…
- A sum of £15,000 is to be invested in a Long-Term Savings Account and growth is projected at 3.25% gross per annum over the next 10 years, subject to tax at the standard rate of 20%. a) Draw the curve to illustrate growth of this investment. b) If no money is withdrawn, calculate how much is in the account after 10 years, after tax. c) There is an opportunity to transfer the investment into an Instant Cash Individual Savings Account, which attracts 1.95% per annum, tax free. Again, if no money is withdrawn, calculate how much theinvestment would be worth after 10 years. d) Comment on your findings above and decide which of the accounts is a better investment and likely togive a better rate of return, bearing in mind that the interest rate of the Individual Savings Account willfluctuate with the bank lending rate.Simile Inc. has a total annual cash requirement of P9,075,000 which are to be paid uniformly. Simile has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. What is the Total Opportunity Cost of keeping cash in the bank?A financial manager is considering two possible sources of funds necessary to finance a $10,000,000 investment that will yield $1,500,000 before interest and taxes. Alternative one is a short-term commercial bank loan with an interest rate of 8 percent for one year. The alternative is a five-year term loan with an interest rate of 10 percent. The firm's income tax rate is 30 percent. What will be the firm’s projected earnings under each alternative for the first year? The financial manager expects short-term rates to rise to 11 percent in the second year. At that time long-term rates will have risen to 12%. What will be the firm’s projected earnings under each alternative in the second year? What are the crucial considerations when selecting between short- and long-term sources of finance?