Fin427

Corporate Finance II
Section: 01
Homework no: 02

Name: Sumaiya Taslima

ID: 17304004

Date of Submission: 23th July

Problem -01

Here, Remittances average = 100,000

Average check = $1,000

Banks charges = $0.3 per processed check

Business days = 270 in a year

Cost = 5% to finance accounts receivables

Reduced the mail float by 1.5 days

Processing time half a day

$ 100,000
The average no of check processed per day = $ 1,000

= 100

The cost of a lockbox is = (100*0.30*270) $

= $ 8100

The savings that lockdown provides = 100,000*(1.5+0.5)*0.05

= $10,000

Here, we find that the annual savings is greater than the cost of lockbox.

So, Simon should keep the lockbox

 Problem-02
Here, administrative salaries= $27,000

Lease payment = $9,000

Depreciation charge = $36,000

Miscellaneous expense = $2,700

Income tax payment = $63,000 due in September and December

New design studio = $180,000 paid in October

Cash in hand on July = $132,000

Minimum cash balance = $90,000

May June July August September October Novemb Decemb January
er er
Sales 180,000 180,000 360,000 540,000 720,000 360,000 360,000 90,000 180,000
Collection
During month 18,000 18,000 36,000 54,000 72,000 36,000 36,000 9,000
Month following 135,000 135,000 270,000 405,000 540,000 270,000 270,000
2nd month following 27,000 27,000 54,000 81,000 108,000 54,000
Total collection 198,000 351,000 531,000 657,000 414,000 33,3000
Labor and raw 90,000 90,000 126,000 882,000 306,000 234,000 162,000 90,000
Material purchase
Payment for 90,000 90,000 126,000 882,000 306,000 234,000 162,000 90,000
purchase
Salaries 27,000 27,000 27,000 27,000 27,000 27,000
Lease payment 9,000 9,000 9,000 9,000 9,000 9,000
Depreciation charge 36,000 36,000 36,000 36,000 36,000 36,000
Miscellaneous char. 2,700 2,700 2,700 2,700 2,700 2.700
Income tax 63,000 63,000
New design studio 180,000

Total payment 164,700 200,700 1019700 560,700 308,700 299,700

Net flow 33,300 150,300 (488,700) 96,300 105,300 33,300
Beginning cash 132,000 165,300 315,600 (173,100) (76,800) 28,500
Ending cash 165,300 315,600 (173,100) (76,800) 28,500 61,800
Target cash (90,000) (90,000) (90,000) (90,000) (90,000) (90,000)
Surplus/shortage 75,300 225,600 (263,100) (166,800) (61,500) (28,200)
Problem -3:

DTC WT
Cost Tk 7.25 Tk 15
Time 3 0

Opportunity cost = 12%

Total money that need to be send is = X tk

Total cost of DTC = 7.25+3*(0.12/360)* X

= 7.25+ (X/100)

Total cost of WT = 15 +0*(0.12/360)*$X

= 15 tk

Here,

7.25+ (X/100) = 15

X/100 =15-$7.25

X = 7749 tk

So, Markin have to send 7749 tk.