A. Yummy Cake Corporation has current assets of $210,000, total assets of $310,000,current liabilities of $230,000, and total liabilities of $245,000. The company is trying toobtain a bank loan for $65,000 which would be financed over six months. The terms ofthe loan agreement specify that the company's current ratio cannot fall below 1.5.Calculate the current ratio before and after the loan. Do you think the loan will begranted? Explain why?B. Low Carb Corp. has current assets of $320,000, total assets of $400,000, current liabilitiesof $95,000, and total liabilities of $200,000. The company is trying to negotiate a bankloan of $60,000. The terms of the loan require repayment over two years and state thatthe debt ratio cannot exceed 0.60. Calculate the debt ratio before and after the bankloan. Do you think the loan will be granted? Explain why.

“Since you have posted multiple questions, we will provide the solution only to the first question…

Answered: Yummy Cake Corporation has current…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A house is selling for $180,000. A deposit of $10,000 was made when the sales contract was signed. The down payment is 25% and the balance will be financed with a 25-year mortgage at 9% and 3 discount points. If the sellers are responsible for the broker's commission (6% of the purchase price); $1,950 in other closing costs; and the existing mortgage with a balance of $60,000; what proceeds will they receive on the sale of the property? $101,850.00 $107,250.00 $112,650.00 O $116,650.00
BNP Paribas has 800 depositors. Each depositor deposits $1,000 into the bank at t=0. BNP Paribas offers its depositors an 8% interest rate. BNP then uses the deposits to make 2 year simple loans at an interest rate of 8%. Depositors of BNP Paribas can either withdraw their deposits at t=1 or t=2. At t=1, BNP can sell its loans at the initial loan values, if needed. Assume that each depositor believes that there are a total of 300 depositors who will withdraw at t=1. How much of loan payments (in $) does each depositor expects the bank to receive at t=2? Round your answer to at least 2 decimal places.
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $5,100. Because you must repay a total of $35,100 in one year, the finance company requires you to pay $35,100/12, or $2,925.00, per month over the next 12 months. a. What rate would legally have to be quoted? b. What is the effective annual rate?
A radio commercial for a loan company states: "You only pay 36¢ a day for each $500 borrowed." If you borrow $2,710 for 162 days, what amount will you repay, and what annual interest rate is the company actually charging? (Assume a 360-day year.) a. Amount you repay=$(Round to two decimal places.) ID
Simple Simon's Bakery purchases supplies on terms of 1.1/10, net 25. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.6% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use 365 days for a year.) The cost of forgoing the discount is %. (Round to one decimal place.) Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Select the best choice below.) A. Simple Simon's should enter into the loan agreement but not begin taking the discount. B. Need more information to answer the question. OC. Simple Simon's should enter into the loan agreement with the bank and begin taking the discount. D. Simple Simon's should not enter into the loan agreement but should begin taking the discount.
\A man loans $4,000 at one interest rate and $5,000 at a 1% greater rate. The $5,000 loan earns $110 more per year than the $4,000 loan earns. Determine the following: The interest rates. Explain the concepts/principles that were considered and the factors that affected the condition of item (a)
A commercial bank is planning to offer Luna a loan in the amount of $15,000 and the bank figures that Luna will repay the loan in full with probability 0.79 and default otherwise. Also, Luna has asked for an interest rate of 12%. In order for the bank to be able to offer this rate, what is the collateral amount that Luna must offer the bank in the event of default? $8,177.5 $8,228.6 $8,366.9 $8,401.1
Jolly Banker is calculating the loan price for a $500,000 operating loan to Kelly business. If approved, this loan will be funded with 35% equity capital, and the remaining funds will come from the bank's debt capital. You have the following information about your bank’s outlays: Administrative costs 0.45% Cost of debt 7.00% Cost of equity 5.00% Probability of loss 0.55% Fees paid by the borrower 1.00% Calculate the weighted average cost of debt for this funding request. (Enter your answer in percentage. Round your answer to 2 decimal places)
Two types of borrowers, type A and B, are requesting a loan in the amount of $44,000. Type A repays with prob. 1, while type B repays with prob. 0.76. If a bank cannot observe type, but believes that fraction 0.8 of the borrower pool is type A, then what is the competitive pooling rate the bank can offer these borrowers? 8.7% 7.7% 6.5% 5.0%
A house is selling for $180,000. A deposit of $10,000 was made when the sales contract was signed. The down payment is 25% and the balance will be financed with a 25-year mortgage at 8% and 3 discount points. If the sellers are responsible for the broker's commission (5% of the purchase price); $1,950 in other closing costs; and the existing mortgage with a balance of $50,000; what proceeds will they receive on the sale of the property? O $113,650.00 O $119,050.00 O $122,650.00 O $128,550.00
You currently have two loans outstanding: a car loan and a student loan. The car loan requires that you pay $322 per month, starting next month for 34 more months. Your student loan is requires that you pay $145 per month, starting next month for the next 46 months. A debt consolidation company gives you the following offer: It will pay off the balances of your two loans today and then charge you $511 per month for the next 37 months, starting next month. If your investments earn 4.14% APR, compounded monthly, how much would you save or lose by taking the debt consolidation company’s offer? If you lose, state your answer with a negative sign (e.g., -25,126)
The Patel Company has several financial issues to solve. As the company’s Financial Analyst you have been asked to answer the following 2 questions: Their bank will lend them $100,000 for 90 days at a cost of $1,200 interest. What is the company’s effective annual rate? A major supplier has granted credit terms of 1/10 N120. Assuming the company can borrow any amount of money at the rate you have calculated above (in part 1), should the company take the discount? (Your answer must be supported with a calculation of the cost of not taking the discount – using either simple or effective annual rate)

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