What is the level of long-term financing if the working capital financing of the firm to fund all fixed asset and 60% of the permanent current assets with long-term financing? Blue Co. has a P320,000 in fixed asset. The current asset per quarter of the company is shown below:2nd1st3rd4thQuarterQuarterQuarterQuarterCash200,000210,000450,000390,000Accounts Receivable240,000340,000390,000240,000Inventories340,000450,000120,000300,000

Given, Long term financing = 60% * Permanent current assets Permanent current assets = Cash +…

Answered: What is the level of long-term…

What is the level of long-term financing if the working capital financing of the firm to fund all fixed asset and 60% of the permanent current assets with long-term financing?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: What is the capitalzed worth of a project that has an indefinitely long study period and dollar cash…

A: The capitalized worth of a project is the present value of the cash flows that the project faces…

Q: provide answer please

A: Definition of the Debt-Equity Ratio:The debt-to-equity ratio is a financial metric that analyzes how…

Q: Which investment(s) should you choose, considering all the above criteria, if the cost of capital is…

A: NPV: It is the present worth of the cashflows including the initial cost of investment. IRR: It…

Q: Use the following information for the question(s) below. Market Value Balance Sheet and Cost of…

A: As per the given information; AssetsLiabilitiesCost of capitalCash 650Debt 1050Debt 3%Other Assets…

Q: The internal rate of return measures the: Select one: a. discount rate that the firm uses in…

A: The internal rate of return, also known as the discounting rate, makes discounted future cash flows…

Q: a) The initial outlay of the investment is €125,000. The income stream is €30,000 in year 1, €55,000…

A: Given Information: Initial investment - 125,000 Income stream: Year 1 - 30,000 Year 2 - 55,000 Year…

Q: What is the value of assets if: Liabilities = R50,000 and Capital = R10,000

A: Lets understand the basics. As per balance sheet equation, total assets is always equal to total…

Q: Get the Answer please

A: To calculate the total market value of equity for SFE Inc., follow these steps: 1. **Number of…

Q: Compute the Payback Period, Discounted Payback Period, Net Present Value, Internal Rate of Return,…

A: Capital projects are those that are spread across several years and requires a significant initial…

Q: The board have assessed that they require funding of £50,000,000 to invest in future projects.…

A: Equity is ownership in the company and ownership is the amount of shares held by the investors of…

Q: Pena Company is considering an investment of $29,480 that provides net cash flows of $8,900 annually…

A: NPV :— NPV is one of the Capital Budgeting techniques which help to Find out whether project is…

Q: investment

A: Formula to calculate the required rate of return is: E(r) = Rf + b(Rm - Rf) Where Rf is the risk…

Q: XYZ company has made three different estimates for a target project as shown in the following table:…

A: The Annual Worth: The annual worth turns the NPV of a project into a series of uniform cash flows…

Q: Q4) Consider the information of the K Ltd. below as on 31st March 2020 (All are in Rs. Million)…

A: The WACC is the cost of different sources of funds weighted by their proportion in the total funds…

Q: The initial investment amount of an investment is 800 Million TL and the expected net cash flows for…

A: The Net present value is an important technique of capital budgeting. It determines the present…

Q: Assuming you are facing with making a decision on a large capital investment proposal. the capital…

A: Capital budgeting is the process of evaluating and measuring the profitability of a capital project…

Q: Determine the payback period for a proposed investment as follows: End of Year 1 2 3 5 Cash Flow,…

A: In this question the cash flows should be in thousands. Initial…

Q: The cashflow of a project in Year 0, 1, 2, and 3 are -$200, $100, $100, $100. If opportunity cost of…

A: Profitability Index (PI) is a discounted capital budgeting technique that is used for…

Q: If the market value of a capital improvement project is $1,447,024, and the bank will lend you 87.9%…

A: Capital is a term for financial asset, such as funds held in deposit accounts and/or funds obtained…

Q: Calculate the Accounting Rate of Return (ARR) of the investment Internal rate of return (IRR)…

A: Accounting Rate of Return: It represents the rate expected to be earned by the project or…

Q: Study the information given and determine, based on its Net Present Value (NPV), whether the…

A: I can calculate the Net Present Value (NPV) of the investment for Umdloti Ltd. Here's a…

Q: Assume that Anonas Company is planning to invest P4M in a new project which will provide net cash…

A: IRR or internal rate of return is a concept in capital budgeting. It is used to evaluate long term…

Q: Evaluate the following capital investments accordingto net present value. Each alternative requires…

A: Cost of capital = 10% Year Cash Flow - 1 Cash Flow - 2 Cash Flow - 3 0 -20,000 -20,000 -20,000…

Q: 23. Investments A and B are mutually exclusive and cost $2,000 each. The firm's cost of capital is…

A: Present Value = Cash Flow / (1 + r)^nWhere:n is the year of cash flowr is the cost of capital (9% or…

Q: Which projects should the firm implement based on your analysis If the projects are mutually…

A: In mutually exclusive projects, only one project which is the most attractive will be accepted. The…

Q: Use an external investing rate of 12% and an external borrowing rate of 6%. Compute the rate of…

A: The given problem can be solved using MIRR function in excel. MIRR function computes rate of return…

Q: Lopez Industries has identified the following two mutually exclusive capital investment projects:…

A: Required return (R) = 11%Time (n) = 4 yearsThe initial investment for project A = $16000The initial…

Q: Park Company is considering an investment that requires immediate payment of $27,215 and provides…

A: The net present value method is used to evaluate investment projects. We can evaluate the project by…

Q: Montclair Company is considering a project that will require a $500,000 loan. It presently has total…

A: Ratio analysis is the study of several financial data points found in the financial statements of an…

Q: Suppose that Linksys is considering the development of a wireless home networking appliance, called…

A: Given data: Year01234Sales ($)2358226444237448392COGS ($)95331069095993393Receivables are 14.5%…

Q: Sunland Corporation is reviewing an investment proposal. The initial cost is $104,400. Estimates of…

Q: What is the profitability index for an investment with the following cash flows given a 20 percent…

A: The Profitability Index(PI) is one of the capital budgeting techniques that take into consideration…

Q: Calculate the:Net Present Value (NPV) of the investment and comment on the viability of the…

A: Net present value is the method used in capital budgeting for evaluating the profitability of the…

Q: The following table tracks the main components of working capital over the life of a four-year…

A: Net working capital = Accounts Receivable+ Inventory - Accounts PayableCash flows = Net working…

Q: CrochetCo is considering an investment in a project which would require an initial outlay of…

A: Net present value refers to the capital budgeting technique for evaluating the projects for capital…

Q: ) The initial outlay of the investment is €125,000. The income stream is €30,000 in vear 1, €55,000…

A: Net present value(NPV) is the difference between present value of all cash inflows and initial…

Q: s (incomes) other than the initial investment is PW = $13,000 at MARR = i%. If MARR changes to (i +…

A: The calculation of future value has its benefits, it is important to remember that future value does…

Q: Please answer the question Minimum 150 words Why the short-term source of capital should be matched…

A: Working capital is the capital required by the company to run its operations. It is calculated form…

Q: Calculate the duration for the following cash flows of an investment. Given the market interest…

A: Year Cash flow 0 0 1 140 2 150 3 160 4 170 5 180 6 190 7 200 8 250 Interest…

Question

What is the level of long-term financing if the working capital financing of the firm to fund all fixed asset and 60% of the permanent current assets with long-term financing?

Blue Co. has a P320,000 in fixed asset. The current asset per quarter of the company is shown below:
2nd
1st
3rd
4th
Quarter
Quarter
Quarter
Quarter
Cash
200,000
210,000
450,000
390,000
Accounts Receivable
240,000
340,000
390,000
240,000
Inventories
340,000
450,000
120,000
300,000

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2 Computation of long term financing

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Similar questions

Calculate Internal Rate of Return to the investor based on a sale of the project at 12/31/26 using a 6.75% Cap Rate as sale value and 2% closing costs. Assume minimum $10,000 working capital at end of every year. All other cash flow is Distributable to investor.
Daymore plc is currently considering three investment opportunities. The following is the details of the investments:-Project A:-1. initial outlay $80m2. Future net inflows Year 1: $190mYear 2: $10mProject B:-1. initial outlay $140m2. Future net inflows Year 1: $180mYear 2: $120mProject C:-1. initial outlay $90m2. Future net inflows Year 1: $10mYear 2: $220mThe company has a capital budget that is restricted in the year of the investment and it will not be possible to undertake all three projects in full. The investment opportunities are independent of one another and each project is divisible (that is, it is possible to undertake part of an investment and to receive a pro-rata return). The cost of capital of the company is 12% and the company uses the net present value method of investment appraisal.Required:Calculate and determine the ranking of the three investment opportunities? (The ranking for the first choice, second choice, and third choice is 1, 2, and 3 respectively). Show…
When calculating the annual rate of return, the average investment is equal to initial investment divided by life of project. (initial investment plus $0) divided by 2. (initial investment plus salvage value) divided by 2. initial investment divided by 2.
What is the profitability index of an investment with initial investment of OMR 6600 and net present value of OMR 2100, where the discount rate was 8 percent?
Machinery purchases, initial investments, premium payments, or extra payments after the starting year, are considered with values of initial capital?
The cash flow for an investment project are listed below. The firm will invest if the present value of the cash flow is positive. Year 1,-200 Year 2,100 Year 3,120 Should the firm undertake this project : If the interest rate is 5 percent?
Suppose an investment has conventional cash flows with positive NPV. How would it impact your decision based on capital budgeting techniques mentioned below? Proﬁtability index (PI) Internal Rate of Return (IRR) Payback Period (PBP) Ratio 2020 2019 2018 2020- Industry Average Inventory Turnover 62.65 42.42 32.25 53.25 Receivables in days 94 63 50 115 Debt to Equity 0.75 0.85 0.90 0.88 Quick Ratio 1.028 1.03 1.029 1.031 Current Ratio 1.33 1.21 1.15 1.25
A firm has the following investment alternatives (refer to image): Each investment costs $3,000; investments B and C are mutually exclusive,and the firm’s cost of capital is 8 percent. a.) According to the internal rates of return, which investment(s) should the firm make? Why? b.) According to both the net present values and internal rates of return, which investments should the firm make? c.) If the firm could reinvest the $3,600 earned in year 1 from investment B at 10 percent, what effect would that information have on your answer to part b? Would the answer be different if the rate were 14 percent?
A project has an initial capital outlay of Kshs.150,000 and unequal net cash-flows of Kshs 100,0000 in year one, Kshs 80,000 in year two, Kshs 70,000 in year three, Kshs 60,000 in year four, Kshs 50,000 in year five and a Kshs. 30,000 residual values at the end of its life in year six. REQUIRED i. Calculate the Accounting Rate of Return ii. Calculate the Internal Rate of Return iii. From your studies, what is the importance of Internal Rate of Return?
What is the NPV of the estimated cash flows for the following project using a Weighted Average Cost of Capital of 7.0%? Year 0 1 2 3 Cash Flow -140 50 70 90 Group of answer choices 47.54 38.63 59.94 70.00 41.34
Permanent working capital is funded through Long-term sources of capital Short-term sources of capital 50% long-term and 50% short-term source of capital Payables
Q1) What is the Free Cash Flow at the end of the year 2? Q2) How much is the capital gain/loss at the end of the project? Q3) What is the amount of Working capital recovered at the end of the project?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS