Factor Financing

• The operation of your business resulted in Sales of $610,000 last year.
• Your year-end AR are $150,000.
• You are considering factoring AR to raise cash to help finance your venture’s growth.
• The factoring company imposes 6% discount and charges additional 2% for each expected 15-day average collection period over 40 days.

1. Calculate the dollar amount you would receive from the factoring company for your AR, if your collection period is 40 days or less.
2. Calculate the dollar amount you would receive from the factor for your AR, if your average collection period is 70 days.
3. Show how your answer in Part B would change, if the factoring company charges 8% discount plus additional 1.5% for each expected 10-day average collection period over 40 days. The actual collection period is the same as in Part B.
4. Calculate average collection period, if $610,000 in Sales last year was evenly distributed throughout the year with average $150,000 in AR.     
5. Using the results from Part D, and given the original terms stated in Part A of the question, calculate the dollar amount you would receive for your AR from the factoring company.

Mrs. S, a 63-year-old patient who suffered a myocardial infarction last year, is in the cardiac rehabilitation center for follow up after suffering from fatigue and shortness of breath; she complains of a “fluttering” feeling with her heartbeat and she has an occasional productive cough. Mrs. S normally does not struggle with nighttime urination, but for the past month, she has to get up to use the bathroom 2-3 times per night. She has gained 5 pounds in the past week.

1. Mrs. S’s physician believes that she has developed congestive heart failure after having an MI last year. Which test would most likely be used to confirm the presence of CHF?

2. The nurse performs a physical assessment on Mrs. S and checks her respiratory rate while listening to her lung sounds. If Mrs. S has CHF, what signs would the nurse most likely notice when performing a respiratory assessment?

After diagnostic testing, Mrs. S is diagnosed with congestive heart failure. Her physician prescribes oral Lasix for her to take every day to help with some of her symptoms and assists her with starting a program through cardiac rehabilitation where she can exercise on a routine basis and continue to be monitored by health professionals.

3. What types of tests would this patient undergo that would diagnose heart failure?

4. How does Lasix help with congestive heart failure symptoms?

5. What information should the nurse include with teaching Mrs. S about taking a diuretic medication, such as Lasix?

6. In addition to regular exercise, what other types of lifestyle changes should Mrs. S implement to control her symptoms of heart failure?

Mrs. S has started taking Lasix and continues with cardiac rehabilitation. She lost the recent weight gained and is able to walk a little further than before when using the treadmill. She also does not get up as often during the night to use the bathroom when she takes her Lasix first thing in the morning. However, Mrs. S still complains of a fluttering feeling in her chest and her blood pressure readings have been elevated. Her last BP was 140/88 mm/Hg. The physician orders Captopril 50 mg po tid and has her come back to the clinic in 2 more weeks.

7. What type of drug is Captopril?

8. Why would this type of medication be prescribed for a patient with heart failure?

9. What information is most important for the nurse to give this patient when using this medication?

10. How would Mrs. S know if her medications are working to control her heart failure?

11. What is a primary nursing diagnosis for Mrs. S and why?

The following information indicates percentage returns for stocks L and M over a 6-year period:

In combining [L−M] in a single portfolio, stock M would receive 60% of capital funds.

Furthermore, the information below reflects percentage returns for assets F, G, and H over a 4-year period, with asset F being the base instrument:

Using these assets, you have a choice of either combining [F−G] or [F−H] in a single portfolio, on an equally-weighted basis.

Required: Calculate the absolute percentage difference in the coefficient of variation (CV) between the stock portfolio [L−M] and the portfolio which outlines the optimal combination of assets.

Answer% Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).

1. Assume the following sales data for a company:

What is the percentage increase in sales from Year 1 to Year 2 (to the nearest percent)?

a.80%

b.25%

c.125%

d.20%

2 Based on the following data, what is the amount of quick assets?

a.$65,000

b.$101,000

c.$175,000

d.$173,000

3 Duke Company has income before income tax of $100,000, interest expense of $20,000, and total stockholders' equity of $100,000. Duke's times interest earned ratio is

a.6.

b.0.2.

c.1.2.

d.4.

4 The balance sheets at the end of each of the first two years of operations indicate the following:

5 If net income is $125,000 and preferred dividends are $9,000 for Year 2, what is the earnings per share on common stock for Year 2? (Round to two decimal places.)

a.$0.19

b.$1.75

c.$2.08

d.$1.93

Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year Assets Cash $ 64,900 $ 83,500 Accounts receivable 80,870 60,625 Inventory 290,656 261,800 Prepaid expenses 1,310 2,095 Total current assets 437,736 408,020 Equipment 147,500 118,000 Accum. depreciation—Equipment (41,625 ) (51,000 ) Total assets $ 543,611 $ 475,020 Liabilities and Equity Accounts payable $ 63,141 $ 129,675 Short-term notes payable 13,000 8,000 Total current liabilities 76,141 137,675 Long-term notes payable 60,000 58,750 Total liabilities 136,141 196,425 Equity Common stock, $5 par value 177,750 160,250 Paid-in capital in excess of par, common stock 52,500 0 Retained earnings 177,220 118,345 Total liabilities and equity $ 543,611 $ 475,020 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales $ 632,500 Cost of goods sold 295,000 Gross profit 337,500 Operating expenses Depreciation expense $ 30,750 Other expenses 142,400 173,150 Other gains (losses) Loss on sale of equipment (15,125 ) Income before taxes 149,225 Income taxes expense 38,250 Net income $ 110,975 Additional Information on Current Year Transactions The loss on the cash sale of equipment was $15,125 (details in b). Sold equipment costing $76,875, with accumulated depreciation of $40,125, for $21,625 cash. Purchased equipment costing $106,375 by paying $50,000 cash and signing a long-term note payable for the balance. Borrowed $5,000 cash by signing a short-term note payable. Paid $55,125 cash to reduce the long-term notes payable. Issued 3,500 shares of common stock for $20 cash per share. Declared and paid cash dividends of $52,100. Required: 1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.)

Additional Information on Current Year Transactions

1. The loss on the cash sale of equipment was $15,125 (details in b).
2. Sold equipment costing $76,875, with accumulated depreciation of $40,125, for $21,625 cash.
3. Purchased equipment costing $106,375 by paying $50,000 cash and signing a long-term note payable for the balance.
4. Borrowed $5,000 cash by signing a short-term note payable.
5. Paid $55,125 cash to reduce the long-term notes payable.
6. Issued 3,500 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $52,100.

Required:
Prepare a complete statement of cash flows using a spreadsheet using the indirect method. (Enter all amounts as positive values.)

The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros is 8%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 9%. The face value of the bond is $100.

a. At what price will the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What will the yield to maturity on the bond be? (Do not round intermediate calculations. Round your answer to 3 decimal places.)

c. If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. Recalculate your answer to (c) if you believe in the liquidity preference theory and you believe that the liquidity premium is 1%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Assume the following information:

1 - year U.S. interest rate = 3%

1- year German interest rate = 6%

Spot rate of euro = $1.09

1. What is the central bank likely to do and how will this affect the value of the euro?

2. Without using an exchange rate model, what is your prediction for the one year forward rate given the likely action of Germany’s central bank, all things being equal?   

3. Using the interest rate parity equation, was your prediction correct? What should the forward rate be?   

4. Based on the one year forward rate you predicted, which investor is likely to benefit from covered interest arbitrage?   

5. Compute the profit and yield to the investor who stands to benefit from covered interest arbitrage.   

1)Gamma reported $600,000 net income for the year with 100,000 common shares outstanding all year. It also had 50,000 shares of $100 par, 8% convertible preferred shares outstanding all year. Each preferred share is convertible into 10 shares of common stock. Determine basic and diluted EPS.

2)Alpha reported net income of $500,000 for the year. It has 200,000 shares of common stock outstanding all year. Two years ago the company granted 20,000 stock options that allow employees to purchase shares for $15 each. The company stock has averaged $20 in the market during the year. Compute the basic and diluted EPS.

Project B has the following Cash Flows: Cost = $800,000; Year 1 = $329,000; Year 2 = $260,750; Year 3 = $192,500; Year 4 = $147,000; Year 5 = $101,500. Calculate the Internal Rate of Return for Project B.