Part A: Cash Flow of Accounts Receivable Myers and Associates, a famous law offi
ID: 2745783 • Letter: P
Question
Part A: Cash Flow of Accounts Receivable
Myers and Associates, a famous law office in California, bills its clients on the first of each month. Clients pay in the following fashion: 40% pay at the end of the first month, 30% pay at the end of the second month, 20% pay at the end of the third month, 5% pay at the end of the fourth month, and 5% default on their bills. Myers wants to know the anticipated cash flow for the first quarter of 2009 if the past billings and anticipated billings follow this same pattern. The actual and anticipated billings are as follows.
Fourth Quarter Actual Billings
First Quarter Anticipated Billings
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
$392,000
$323,000
$296,000
$340,000
$360,000
$408,000
Part B: Straight Bank Loan
Right Bank offers EAR loans of 9.38% and requires a monthly payment on all loans.
What is the APR for these monthly loans?
What is the monthly payment for the following?
A loan of $200,000 for six years
A loan of $450,000 for twelve years
A loan of $1,250,000 for thirty years
Part C: Selling Bonds
Astro Investment Bank has the following bond deals under way:
Company
Bond Yield
Commission
Coupon Rate
Maturity
Gravity Belts
8.0%
2% of Sale Price
8.0%
10 years
Invisible Rays
9.0%
3% of Sale Price
12.0%
10 years
Solar Glasses
7.0%
2% of Sale Price
5.0%
20 years
Space Ships
12.0%
4% of Sale Price
0%
20 years
Determine the net proceeds of each bond and the cost of the bonds for each company in terms of yield. The bond yield in the table is the market yield before the commission is charged. Assume that all bonds are semiannual and issued at a par value of $1,000.
Fourth Quarter Actual Billings
First Quarter Anticipated Billings
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
$392,000
$323,000
$296,000
$340,000
$360,000
$408,000
Explanation / Answer
Anticipated cash flow for the first quarter of 2009 . the first , second , third & fourth montrh are taken for each month going backward.
Actual Billings Anticipated billings Oct Nov Dec Jan Feb Mar Billings 392,000.00 323,000.00 296,000.00 340,000.00 360,000.00 408,000.00 Anticipated cash flow in Q1 40% of first month receipts 136,000.00 144,000.00 163,200.00 30% second month receipts 88,800.00 102,000.00 108,000.00 20% third month receipts 64,600.00 59,200.00 68,000.00 5% fourth month receipts 19,600.00 16,150.00 14,800.00 5% default - - - Anticipated cash receipts 309,000.00 321,350.00 354,000.00