Problem 16-14
Cash Budgeting

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,300 per month, and the rent is $2,100 per month. In addition, she must make a tax payment of $14,000 in December. The current cash on hand (on December 1) is $400, but Koehl has agreed to maintain an average bank balance of $5,500 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $130,000.

1. Prepare a cash budget for December, January, and February.

   I. Collections and Purchases:
   	December	January	February
   Sales	$	$	$
   Purchases	$	$	$
   Payments for purchases	$	$	$
   Salaries	$	$	$
   Rent	$	$	$
   Taxes	$	---	---
   Total payments	$	$	$
   Cash at start of forecast	$	---	---
   Net cash flow	$	$	$
   Cumulative NCF	$	$	$
   Target cash balance	$	$	$
   Surplus cash or loans needed	$	$	$

   
   
2. Suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)
   $

Free Cash Flows

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

1. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
   2018: $    million
   2017: $    million
   
2. What is the free cash flow for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to one decimal place.
   $    million
   
3. What is the ROIC for 2018? Round your answer to two decimal places.
   %
   
4. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.

   Reduction (increase) in debt	$    million
   Repurchase (Issue) stock	$    million

Problem 16-03
Cost of Trade Credit

What are the nominal and effective costs of trade credit under the credit terms of 1/20, net 40? Assume 365 days in a year for your calculations. Round your answers to two decimal places. Do not round intermediate calculations.

Problem 16-04
Cost of Trade Credit

A large retailer obtains merchandise under the credit terms of 2/15, net 40, but routinely takes 65 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

%

Free Cash Flows

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

Using Rhodes Corporation's financial statements (shown above), answer the following questions.

1. What is the net operating profit after taxes (NOPAT) for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
   $    million
   
2. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
   2018: $    million
   2017: $    million
   
3. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
   2018: $    million
   2017: $    million
   
4. What is the free cash flow for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to one decimal place.
   $    million
   
5. What is the ROIC for 2018? Round your answer to two decimal places.
   %
   
6. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.

   After-tax interest payment	$    million
   Reduction (increase) in debt	$    million
   Payment of dividends	$    million
   Repurchase (Issue) stock	$    million
   Purchase (Sale) of short-term investments	$    million

Amortization schedule

1. Set up an amortization schedule for a $36,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 6% compounded annually. Round all answers to the nearest cent.

   	Beginning		Remaining
   Year	Balance	Payment	Balance
   1	$	$	$
   2	$	$	$
   3	$	$	$

2. What percentage of the payment represents interest and what percentage represents principal for each of the 3 years? Round all answers to two decimal places.

   	% Interest	% Principal
   Year 1:	%	%
   Year 2:	%	%
   Year 3:	%	%

3. Why do these percentages change over time?

   1. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the balance declines.
   2. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the balance declines.
   3. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the balance increases.
   4. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the balance increases.
   5. These percentages do not change over time; interest and principal are each a constant percentage of the total payment.

The Lopez-Portillo Company has $12.2 million in assets, 80 percent financed by debt and 20 percent financed by common stock. The interest rate on the debt is 9 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $26 million in assets.

Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 12 percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 30 percent.

a. If EBIT is 10 percent on total assets, compute earnings per share (EPS) before the expansion and under the two alternatives. (Round your answers to 2 decimal places.)

Earnings per share

Current ___________________

Plan A____________________

Plan B____________________

b. What is the degree of financial leverage under each of the three plans? (Round your answers to 2 decimal places.)

  Degree of financial leverage

Current____________________________

Plan A ____________________________

Plan B ____________________________

c. If stock could be sold at $20 per share due to increased expectations for the firm’s sales and earnings, what impact would this have on earnings per share for the two expansion alternatives? Compute earnings per share for each. (Round your answers to 2 decimal places.)
   Earnings per share

Plan A _____________________

Plan B______________________

In this week’s readings, you learned about other types of cost classifications, such as differential costs, sunk costs, and opportunity costs. Discuss how these concepts are used in managerial decision making? Include an example in your response. Please be sure to validate your opinions and ideas with citations and references in APA format.

To supplement your​ retirement, you estimate that you need to accumulate ​$270,000 exactly 35 years from today. You plan to make​ equal, end-of-year deposits into an account paying  11% annual interest. a.  How large must the annual deposits be to create the ​$270,000 fund by the end of 3535 ​years? b.  If you can afford to deposit only ​$660 per year into the​ account, how much will you have accumulated in 35 ​years?

12.Larry decide to begin saving towards the purchase of a backup generator in 5 years. If he puts $2,000 at the beginning of each of the next 5 years in a savings account paying 9 percent compounded quarterly, how much will you accumulate after 5 years? Note: You are only making 5 payments, and the first payment is today. a. $11,636.23 b. $13,046.67 c. $11,969.42 d. $12,043.17 e. $13,164.19

11. Krishnan decide to begin saving towards the purchase of a new Toyota Highlander in 7 years. If he puts $4,000 at the beginning of each of the next 7 years in a savings account paying 7 percent compounded annually, how much will he accumulate after 7 years? Note: Krishnan is only making 7 payments, and the first payment is today. a. $33,575.35 b. $34,616.08 c. $35,750.74 d. $37,039,21 e. $41,969.19

Based on the following table, calculate the forward discount (or forward premium) at which USD is trading against CHF for a 6-month delivery. Which currency is trading at forward premium for a delivery in 3 months? Explain.

                                                              USD equivalent               Currency per USD

                CHF                                     1.0697                                                 0.9348

                        1-mos forward      1.0700                                               0.9346

                        3-mos forward      1.0705                                                0.9341

                        6-mos forward      1.0715                                               0.9333

                GBP                                     1.5733                                                0.6356

                        1-mos forward      1.5729                                                 0.6358

                        3-mos forward      1.5723                                                 0.6360

                        6-mos forward      1.5713                                                 0.6364

Nippon Steel’s expenses for heating and cooling a large manufacturing facility are expected to increase according to an arithmetic gradient beginning in year 2. If the cost is $550,000 this year (year 0) and will be $550,000 again in year 1, but then it is estimated to increase by $41,000 each year through year 12, what is the equivalent annual worth in years 1 to 12 of these energy costs at an interest rate of 11% per year? The equivalent annual worth is determined to be?

help with excel formulas to answer this question would be great, thanks.