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Question
The Essex Company found that an average of 10 days elapses between when customer payments are received and the deposited funds clear the customer's bank and become usable by the firm. Essex's annual sales are $240 million (Assume 365 days per year when converting from annual data to daily data or vice versa.) Suppose that Essex is able to reduce the time required to process customer payments by 4 days through more efficient payment processing methods. Given that these additional funds can be used to reduce the firm's outstanding bank loans (10% interest rate), what is the annual pretax savings in interest expense?a. $263,014
b. $96,000,000
c. $66,667
d. $2,630,149
Answer
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Related questions
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Q:
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Q:
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Q:
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b. multiplied by 1 plus the percentage stock dividend rate
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Q:
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Q:
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Q:
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b. have assets in excess of $500,000
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Q:
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Q:
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Q:
Explain the pecking order theory.
Q:
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Q:
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Q:
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Q:
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Q:
The optimal capital structure is a function of ____.
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b. financial distress costs
c. agency costs
d. All of these are correct.
Q:
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Q:
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a. initially rises slowly, then falls beyond some point
b. increases at a steady rate throughout the entire range
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d. initially rises slowly, then increases rapidly beyond some point
Q:
Perfect capital markets imply the following:
a. there are no transactions costs for buying and selling securities
b. relevant information is readily available for individuals and is costless to obtain
c. all investors can borrow and lend at the same rate
d. All of these answers are correct.
Q:
Two prominent finance researchers (Modigliani and Miller) showed that
a. the firm's optimal capital structure consists of approximately equal proportions of debt and equity
b. the value of the firm is independent of its capital structure in perfect capital markets with no income taxes
c. the firm's cost of capital is minimized when its capital structure consists of approximately equal proportions of debt and equity
d. the value of the firm is independent of its capital structure in perfect capital markets with income taxes
Q:
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c. $6,250
d. $25,000
Q:
Borkstran has sales of $7.8 million, a variable cost ratio of 0.6, EBIT of $1.1 million, and a degree of combined leverage of 3.4. What is Borkstran's degree of financial leverage?
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b. 0.73
c. 2.29
d. 0.84
Q:
Kenzel has an EPS of $4.20 and sales are $9 million. If the firm has a degree of operating leverage of 4.0 and a degree of financial leverage of 5.2, forecast EPS if the firm expects a 4% sales decline.
a. $0.71
b. $3.49
c. $4.03
d. $3.33