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Homework answers / question archive / 1) Aroma Oil has P9 million in accounts payable, P1
1) Aroma Oil has P9 million in accounts payable, P1.8 million in salaries and taxes payable, and P10.4 in other current liabilities. If Aroma Oil had a cost of sales of P54 million and selling, general, and administrative expense of P18 million, what is the length of its payables deferral period?
2) Determine the weighted cost of capital for the Boones Company that will finance its optimal capital budget with P120 million of long-term debt (kd = 12.5%) and P180 million in retained earnings (ke = 16.0%). Boones' present capital structure is considered optimal. The company's marginal tax rate is 40%. (Compute answer to nearest 0.1%.)
3) Online StoreInc. earned P280,000 after taxes last year. Its expenses included depreciation of P55,000, interest expenses of P40,000, and deferred taxes of P20,000. The company also purchased two new fresh water fishing boats for P40,000 (P20,000) each. What is Ship-to-Shore's after-tax cash flow for last year?
1) Computation of the length of payable deferral period:-
Payables Deferral period = (Payables / (Cost of sales + Selling general and administrative expenses))*365
= (9/(54+18))*365
= 0.125 * 365
= 45.63 days
2) WACC = 12.6%
3) Computation of the after tax cash flow:-
After tax cash flow = Earnings after tax + Deferred taxes + Depreciation
= P280,000 + P20,000 + P55,000
= P355,000
