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1). Rose Resources faces a smooth annual demand for cash of $10.3 million; incurs transaction costs of $340 every time they sell marketable securities, and can earn 4.2 percent on their marketable securities. What will be their optimal cash replenishment level? (Round your answer to 2 decimal places.)

 

2). Hollywood Shoes would like to maintain their cash account at a minimum level of $57,000, but expect the standard deviation in net daily cash flows to be $4,700; the effective annual rate on marketable securities to be 6.50 percent per year; and the trading cost per sale or purchase of marketable securities to be $170 per transaction. What will be their optimal upper cash limit? (Round your answer to the nearest dollar amount.)

 

3). MC Enterprises estimates that it takes, on average, 12 days for their customers' payments to reach them, 3 day for the payments to be processed and deposited by their bookkeeping department, and 2 more days for the check to clear once they're deposited. What is their collection float?

 

4). If a firm has a cash cycle of 34 days and an operating cycle of 98 days, what is its average payment period?

 

5). Your company doesn't face any taxes and has $256 million in assets, currently financed entirely with equity. Equity is worth $8.6 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below:

 

State Pessimistic Optimistic

  

Probability of State .30 .70

  

Expect EBIT in State $16 million $56 million

 

The firm is considering switching to a 25-percent debt capital structure, and has determined that they would have to pay a 11 percent yield on perpetual debt in either event. What will be the level of expected EPS if they switch to the proposed capital structure? (Round your intermediate calculations and final answer to 2 decimal places except calculation of number of shares which should be rounded to nearest whole number.)