The company will have to borrow US $100,000 in April. which means that interest will have to be paid in May at the rate of 1% per month 12% annual rate). Consequently, interest expense is US $1,000 $100,000 x1%) May sales x 50%) + $50,000 April sales x 50%)]. Disbursements in May $4rt,nrtr! [ 740,000 May payables x 75%) + $40,000 April payables 25%)]. In addition to the May accounts payable disbursements, payroll and other disbursements are US $60,000, bringing total disbursements to US $101,000 $60,000 + $40,000 + $1,000 Thus, disbursements exceed receipts by US $26,000 $101 ,06u $75,000). However, cash has a beginning surplus balance of US $7,500 $100,000 April loan - $92,500 negative cash flow for April). As a result, the company needs to borrow an additional US $18,500 to eliminate its cash deficit. Given the requirement that loans be in US $10,000 increments, the May loan must be for US $20,000. The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a US Collections. 50% of the current month's sales budget and 50% of the previous month's sales budget. $200,000 line of credit with its bank at a 12% annual rate of Accounts Payable Disbursements. 75% of the current month's interest on which borrowings for cash deficits must be made in US$. increments. There is no outstanding balance on the accounts payable budget and 25% of the previous month's accounts payable budget. line of credit loan on April 1. Principal repayments are to be made in any month in which there is a surplus of cash. Interest is to be paid monthly. If there are no outstanding balances on the loans. Raymar will invest any cash in excess of its desired end-of-month cash balance in U.S. Treasury bills. Raymar intends to maintain a minimum balance of US All other disbursements occur in the month in which they are budgeted.
Question 387
Which of the following is a primary driver behind the creation and prioritization of new strategic initiatives established by an organization?
Correct Answer: B
Question 388
The marginal cost of debt for an entity is defined as the interest rate on <List A> debt minus
Correct Answer: C
The marginal cost of debt as a rate) must equal the cost of new debt as a rate) minus the tax savings as a rate). Hence, marginal cost equals the cost of new debt times one minus the marginal tax rate, or ks(1 - T). This expression equals Ka - Kat. The marginal cost of debt financing is the interest rate on new debt minus the entity's marginal tax rate multiplied by the interest rate. Moreover, the marginal or incremental cost of debt to the entity is based on the cost of newly issued debt, not on the cost of outstanding debt.
Question 389
An insurance firm that follows the systems development life cycle concept for all major information system projects is preparing to star[ a feasibility study for a proposed underwriting system. Some of the primary factors the feasibility study should include are:
Correct Answer: D
The feasibility study should consider the activity to be automated, the needs of the user. The type of equipment required, the cost, and the potential benefit to the specific area and the company in general. Thus, technical feasibility and cost are determined during this stack
Question 390
The immediate goal of a theory of constraints (TOC) analysis is to:
Correct Answer: C
A basic principle of TOC analysis is that short-term profit maximization requires maximizing the contribution margin through the constraint, called the throughput margin or throughput contribution.
