Brealey Principles 12e

Pr 30-02

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Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Discount % 1%
Discount days 30
Net days 60
Invoice amount $1,000

Solution and Explanation:

a.
Discount amount $10.00

b.
Rate .010101
EAR 13.01%

c.
Goods are perishable Shorter
Goods are not rapidly resold longer
Goods sold to high-risk firms shorter

Notes:
Brealey Principles 12e
Pr 30-04

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Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Wholesale price $62
Production cost $52
Bankruptcy % 23%
Q units 1,000
Credit period in months 4
Discount rate annual 12%

Solution and Explanation:

a.
NPV -$6,029.80

b.
Accept? Reject
Brealey Principles 12e
Pr 30-05

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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.

Input variables:
PV revenue $1,290
Cost $1,095
Probability pmt 1 .82
Probability pmt 2 .93
b. Cost $14

Solution and Explanation:

a.
Expected profit 84.9%

b.
Expected profit 2 $104.70
Breakeven point 1.94 units

`
Brealey Principles 12e
Pr 30-06

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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Price $1,290
Cost $1,045
Profit $245
Probability 79%
Rate 21%

Solution and Explanation:

Expected profit sale 1 -$25.90
P2 84.08%
algo versions.
Brealey Principles 12e
Pr 30-10

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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.

Input variables:
182-day T-bill discount 1.68
Number of months 6

Solution and Explanation:

Bill price 99.16
Annual yield 1.701%
Brealey Principles 12e
Pr 30-16

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Input variables:
Bad debt ratio 6.6%
Sales reduction 5.6%
New bad debt ratio 4.6%
Cost of goods sold/sales 86%

Solution and Explanation:

Current Proposed
policy policy
Sales $100.00 $94.40
Bad debts $6.60 $4.34
Cost of goods $86.00 $81.18
Profit $7.40 $8.87
go versions.
Brealey Principles 12e
Pr 30-19

All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Net days 63
Average collection period 78
Discount % 2%
Discount days 10
EOM billing
Net days 63
% of sales with discount 63%
Cash discount period days 33
Net days 83
Interest rate 11%
Cost of goods sold/sales 83%
Days per year 360
Sales amount $100

Solution and Explanation:

Original terms:
NPV per $100 of sales $14.76

Revised terms
NPV per $100 of sales $14.27
lgo versions.
Brealey Principles 12e
Pr 30-21

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Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Credit sales $208,800,000
Flat fee - new $180,000
Float reduction days 3
Borrowing rate 11%
Collection costs - old $48,000
Days per yeasre 360

Solution and Explanation:

a.
Increase in cash $1,740,000

b.
Interest income $191,400

c.
Annual cost of old system $239,400

d.
Annual cost savings $59,400
Accept new offer? Yes
Brealey Principles 12e
Pr 30-22

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Input variables:
Number of checks 260
Average payment $2,900
Fee per check $.54
Compensating balance $760,000
Interest rate 7%
Days per year 365

Solution and Explanation:

Daily cost per check fee $140
Daily cost w/compensating $146
Best method? Per check fee

Number of days .97

Brealey Principles 12e
Pr 30-24

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Input variables:
Collections per day $15,000
Float reduction days 4
Compensating balance $26,400
Fee per check $.15
Annual interest rate 7%
Days per year 365

Solution and Explanation:

a.
Additional available cash $60,000
Benefit of lockbox $33,600
System worthwhile? Yes

b.
Average check size 444
Brealey Principles 12e
Pr 30-25

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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Bill 1 months 6
Bill 2 months 9
Discount 9

Solution and Explanation:

a-1.
Price 95.50
Yield 9.65%

a-2.
Price 93.25
Yield 9.77%

b.
Preferred
Brealey Principles 12e
Pr 30-26

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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Face value $100
Original months 3
Original price $98.50
New months 2
Discount rate 6
Annual yield 6.23% Must be computed - not input as a value

Solution and Explanation:

a.
2-month yield .0101
Price $99.00

b.
Monthly return .51%

c.
Annual yield 6.23%
Brealey Principles 12e
Pr 30-29

All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.

Input variables:
Taxable yield 5.29%
Tax-exempt yield 3.40%

Solution and Explanation:

Marginal tax rate 35.73%