Finance Problems essay assignment
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Finance Problems essay assignment
Finance Problems – Set #
1.) After seeing the tremendous popularity of the Ziptrek zipline in Vancouver during the Winter Olympics, a Toronto company is planning to build a similar attraction. $12,000,000 in new capital will be required. Currently, the financial structure of the company includes:
$3,000,000 of 6% bonds
$5,000,000 of 7% cumulative preferred stock
3 million shares of common stock at a book value of $12,000,000
Retained earnings of $900,000
The following three alternatives can be used to provide the $12,000,000 required for the project.
- i) $8 million in 5.5% bonds and $4 million in common stock at $12.50/share
- ii) $10 million in 5.6% bonds and $2 million in 7.5% cumulative preferred
stock
iii) $12 million in 5.7% bonds.
The company has forecasted earnings before taxes for 2010 of $4,000,000. The firm’s tax rate is 50%. Which alternative should they choose and why?
2.) Prepare a cash budget for Champion Limited for the months of June, July, and August, 2010. The firm wishes to maintain, at all times, a minimum cash balance of $55,000. Determine whether or not borrowing will be necessary during the period and, if it is, when and for how much. Also assume that any excess cash balances at month-end will be used to pay down any borrowing from previous months. As of May 31, the firm had a cash balance of $62,000
Actual Sales Forecasted Sales
April $ 80,000 June $50,000
May $140,000 July $39,000
August $60,000
Accounts Receivable: All sales are made on account. 60% of accounts receivable are collected in the month of sale, 30% in the next month, and 10% in the next month.
Purchases: 40% of each month’s sales. 50% paid in the month of occurrence, 30% in the following month, and 20% in the next month.
Proceeds from sale of property: $25,000 cash sale received in July.
Selling and administrative expenses: $14,000 per month
Interest payments on long-term debt: $20,000 due to be paid on July 15.
Dividends: $4,000 paid on August 3
Capital expenditures for new equipment: $60,000 in June, $20,000 in August.
Taxes: $2,000 due in July.
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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