1. Rainer Inc. has fixed costs of $2,000,000, including depreciation of $300,000. The EBITDA is $1,250,000. Calculate the cash flow operating leverage. What does this mean?
2. Roadrunner Trucking earns $4.50 per mile. Variable cost per mile is $2.50. Fixed costs are $1,000,000 including depreciation of $350,000. Compute the cash breakeven in yards
3. Below is the long-term and capital section of the balance sheet of Mt. Rushmore Mining Co.:
|
Category
|
Value
|
|
Notes Payable
|
$6,000,000
|
|
Bonds Payable
|
1,000,000
|
|
Preferred Stock
|
500,000
|
|
Common Stock
|
6,000,000
|
|
Retained Earnings
|
5,000,000
|
Interest of notes is 10%, bonds payable 8%, preferred stock dividends are 5% and common shareholders opportunity cost is 25%. Tax rate is 30%. Compute the average weighted cost of capital.
4. The cost of goods sold is $2,000,000, and inventory is $500,000. Calculate the days on hand.
5. Sales on account are $8,000,000, and accounts receivable are $3,000,000. Calculate the days outstanding.
6. The cost of goods sold is $3,500,000, and accounts payable are $500,000. Compute the days in accounts payable.
7. Compute the cash conversion cycle using information from the previous three questions.
8 Spokane Company uses a lock box in Seattle. They process 300,000 checks a day, and the average check size is $250. The process saves two days in float and one half-day in processing. The bank charges 15 cents per check. There are 270 business days in the year. The company figures it costs them 4% to carry the accounts receivable. Which method is better: lock box or carrying the accounts for an extra 2.5 days?