7. Explain how a company could: (a) avoid a backlog of orders when sales exceed expectations; (b) avoid product defects on new products; (c) offer more credit to its customers when it already has a bad debt problem; (d) improve its credit rating with suppliers after paying some late; (e) lower its cost of financing when the market interest rate has increased.

1. How would each of the following events change the equilibrium financial market value of a company? (a)an increase in its cost of production; (b) an increase in its cost of financing; (c) an increase in the market’s discount rate; (d) an increase in its sales revenue; and (e) an increase in its projected future profits.

Secured Problem 1 - Structuring a Secured Loan Transaction

Marine Systems, Inc. is a retail seller of personal watercraft, which it manufactures from component parts. Marine Systems operates five stores in the Seattle area along with a separate manufacturing facility. It leases the premises for the stores and manufacturing facility. Its total inventory of watercraft and component parts has a wholesale value of $800,000, which Marine Systems sells at a 75% markup. Marine Systems also owns $150,000 in display cases, cash registers, tools, computers, and the like.

Marine Systems currently owes its various unsecured creditors approximately $500,000. After deducting its monthly payments to these creditors and overhead costs, Marine Systems nets $5000 per month. Marine Systems regularly sells watercraft to the City of Seattle and The University of Washington. Marine Systems invoices both purchasers with payment due within 30 days after delivery. Presently, each customer owes $25,000.

The job of a commercial attorney is to identify risks and propose ways to minimize them. Answer the following questions:

a.      Marine Systems has asked Credit, Inc. for a $150,000 loan to expand its workforce. Credit, Inc. is inclined to make the loan but requests advice as to whether it should demand security. What do you advise?

1. What are the advantages of a secured credit transaction for the creditor?

2. Why would Marine Systems, the debtor, agree to a secured debt transaction? In other words, can Marine Systems benefit from the transaction?
3. What is Marine Systems’ balance sheet (i.e., assets v. liabilities)

4. How big is the risk if the loan were unsecured? What is the worst case scenario?

5. If Marine Systems wanted an unsecured loan, would a higher interest rate compensate Credit Inc., for the risks?

b.      If Credit, Inc. wants a security interest, what collateral would you recommend? There are risks associated with all of these categories of collateral. How will you protect the secured creditor from these risks?

1. Marine Systems’ $5,000 monthly profit?

2. Inventory?

3. Equipment

4. Accounts Receivable?

(a) Identify and briefly describe two phases of the capital budgeting process. (b) Would saving time by skipping one of these phases in the capital budgeting process make sense financially?

Matthew has a new job as business analyst. He plans to invest 10 percent of his annual salary after the tax into a retirement account at the end of every year for the next 30 years. Suppose that annual return of the investment is 6%, and his current salary before tax is 90k which grow 3% per year. The tax will apply as 15% on the salary up to 50k and it is 20% for the salary interval of 50k and 80k and the tax rate will be 25% for the remaining salary more than 80k (for example if his salary will be 105k, he is paying 15% tax on his first 50k and 20% in the next 30 k and 25% on his next 25k of his salary). then:
a)   Create a spreadsheet which shows Matthew the balance of retirement account for various levels of annual investments and returns.
b)   If Matthew aims to gain $1,000,000 at the end of the 30th year, what percentage of his salary he should put in the investment annually.

a) Provide two reasons for a company to lease some type of capital equipment, rather than buying it. (b) Provide three reasons for a company to buy some capital equipment, rather than lease it.

Describe the close relationship between finance and economics and explain why the finance manager should possess a basic knowledge of economics . What is the primary economic principle used in managerial finance ? ( 250-300 words)

A loan of 124,000 is to be repaid in 30 years by month-end repayments starting in one month. The interest rate is 4.8% p.a. compounded monthly. Calculate the interest paid in Year 5. (between the end of month 48 and the end of month 60). Correct your answer to the nearest cent without any units. (Do not use "$" or "," in your answer. e.g. 12345.67) (Hint: you can use Excel to find the answer.)

How does a company utilize stocks and bonds in financing growth? Identify the major sources of external financing for companies.

A new market opportunity has opened, and you expect that you will be able to double your sales in 2019. Assume that COGS, operating expenses, current assets and current liabilities maintain the same PERCENTAGE OF SALES as in 2018. Assume no new fixed assets, nothing from 2018 was fully depreciated, and you will have the same dividend policy in 2019 as you did in 2018.

Use the financial statements below to determine if additional funds will be needed, and if so, how much.

a- No Additional Funds Needed

b- $3,333

c- $65,000

d- $8,000

Briefly outline the history of HSBC plc. How would you describe its business model?

How does wholesale banking differ from retail banking in terms of: (a) product range; (b) client coverage; (c) marketing; (4) risk management; (5) pricing.

Explain diversification and benefit of a diversified portfolio.

Suppose you want to have $700,000 for retirement in 25 years. Your account earns 7% interest compounded monthly. a) How much would you need to deposit in the account each month? $ b) How much interest will you earn? $