Finance-Asset Management

Shanklin Inc. purchases merchandise on terms of 2/15, net 40, and its total gross purchases (i.e., purchases before taking off the discount) are $800,000 per year. What is the maximum amount of costly trade credit Shanklin could get, assuming it abides by the supplie's credit terms? (Assume a 365-day year.)
a. $53,699
b. $56,384
c. $59,203
d. $62,163
e. $65,271

(22.8) Stretching accounts payable
iv. Hefner Inc. business is booming, and it needs to raise more capital. The company purchases supplies on terms of 1/10, net 20, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual rate of funds raised by this action? (Assume a 365-day year.)
a. 10.00%
b. 11.11%
c. 11.75%
d. 12.29%
e. 13.01%

(22.9) ROE and working capital policy
v. Shahrokhi Enterprises follows a moderate current asset investment policy, but it is now considering whether to shift to a restricted or perhaps to a relaxed policy. The firm's annual sales are $400,000; its fixed assets are $100,000; its target capital structure calls for 50% debt and 50% equity; its EBIT is $35,000; the interest rate on its debt is 10%; and its tax rate is 40%. With a restricted policy, current assets will be 15% of sales, while under a relaxed policy they will be 25% of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?
a. 4.3%
b. 4.7%
c. 5.3%
d. 5.8%
e. 6.4%

(22.12) Revolving credit agreement
vi. Gorman Inc. arranged a $10,000,000 revolving credit agreement with a group of banks. The firm paid an annual commitment fee of 0.5% of the unused balance of the loan commitment. On the used portion of the revolver, it paid 1.5% above prime for the funds actually borrowed on a simple interest basis. The prime rate was 9% during the year. If the firm borrowed $6,000,000 immediately after the agreement was signed and repaid the loan at the end of one year, what was its total dollar cost for the year?
a. $617,500
b. $650,000
c. $682,500
d. $716,625
e. $752,456