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    FIN222 - Tutorial - 10 - Updated With EAC Question

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    HELENA
    This document contains summaries of tutorial materials covering various corporate finance topics: 1) It includes an example cash equation problem calculating the cash amount for a company given its book net worth, long-term debt, net working capital, fixed assets, and current liabilities. 2) It discusses calculating cash collections over different time periods (quarters, months) for companies with specified sales amounts, accounts receivable balances, and collection periods. 3) It provides an example of calculating operating and cash cycles for a company based on its financial statement information. 4) It presents another cash collections problem calculating sales and cash collection amounts for different months based on a company's sales budget, credit sales collection periods, and prior

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    FIN222 - Tutorial - 10 - Updated With EAC Question

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    HELENA
    62 views6 pages
    This document contains summaries of tutorial materials covering various corporate finance topics: 1) It includes an example cash equation problem calculating the cash amount for a company given its book net worth, long-term debt, net working capital, fixed assets, and current liabilities. 2) It discusses calculating cash collections over different time periods (quarters, months) for companies with specified sales amounts, accounts receivable balances, and collection periods. 3) It provides an example of calculating operating and cash cycles for a company based on its financial statement information. 4) It presents another cash collections problem calculating sales and cash collection amounts for different months based on a company's sales budget, credit sales collection periods, and prior

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    This document contains summaries of tutorial materials covering various corporate finance topics: 1) It includes an example cash equation problem calculating the cash amount for a company given its book net worth, long-term debt, net working capital, fixed assets, and current liabilities. 2) It discusses calculating cash collections over different time periods (quarters, months) for companies with specified sales amounts, accounts receivable balances, and collection periods. 3) It provides an example of calculating operating and cash cycles for a company based on its financial statement information. 4) It presents another cash collections problem calculating sales and cash collection amounts for different months based on a company's sales budget, credit sales collection periods, and prior

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    62 views6 pages

    FIN222 - Tutorial - 10 - Updated With EAC Question

    Uploaded by

    HELENA
    This document contains summaries of tutorial materials covering various corporate finance topics: 1) It includes an example cash equation problem calculating the cash amount for a company given its book net worth, long-term debt, net working capital, fixed assets, and current liabilities. 2) It discusses calculating cash collections over different time periods (quarters, months) for companies with specified sales amounts, accounts receivable balances, and collection periods. 3) It provides an example of calculating operating and cash cycles for a company based on its financial statement information. 4) It presents another cash collections problem calculating sales and cash collection amounts for different months based on a company's sales budget, credit sales collection periods, and prior

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 6

    FIN922 –Corporate Finance –

    Tutorial

    Dr. Kashif Saleem


    E-mail: [email protected]
    Office: Room 105, 1st floor

    5-1
    Cash Equation:

    Rocco Corp. has a book net worth of $10,380. Long-term debt is $7,500. Net
    working capital, other than cash, is $2,105. Fixed assets are $15,190. How much
    cash does the company have? If current liabilities are $1,450, what are current
    assets?

    6-2
    Calculating Cash Collections: The Morning Jolt Coffee Company has
    projected the following quarterly sales amounts for the coming year:

    a. Accounts receivable at the beginning of the year are $360. Morning Jolt has a
    45-day collection period. Calculate cash collections in each of the four quarters
    by completing the following:

    b. Rework (a) assuming a collection period of 60 days.


    c. Rework (a) assuming a collection period of 30 days.
    6-3
    Calculating Cycles: Consider the following financial statement information
    for the Mediate Corporation:

    Calculate the operating and cash cycles. How do you interpret your answer?

    6-4
    Calculating Cash Collections: The following is the sales budget for
    Trickle, Inc., for the first quarter of 2009:

    Credit sales are collected as follows:


    • 65 percent in the month of the sale
    • 20 percent in the month after the sale
    • 15 percent in the second month after the sale
    • The accounts receivable balance at the end of the previous quarter was
    $173,000($136,000 of which was uncollected December sales).

    a. Compute the sales for November.


    b. Compute the sales for December.
    c. Compute the cash collections from sales for each month from January through
    March.

    6-5
    Tutorial 6: Calculating EAC

    You are evaluating two different silicon wafer milling machines. The
    Techron I costs $290,000, has a three-year life, and has pretax operating costs
    of $67,000 per year. The Techron II costs $510,000, has a five-year life, and
    has pretax operating costs of $35,000 per year. For both milling machines,
    use straight-line depreciation to zero over the project’s life and assume a
    salvage value of $40,000. If your tax rate is 35 percent and your discount rate
    is 10 percent,

    compute the EAC for both machines.


    Which do you prefer?
    Why?

    5-6

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