ASSIGNMENT 08

BU440 Financial Management II

Directions: Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling, and grammar.

Respond to the items below.

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.

a. What is the APR for these monthly loans?

b. What is the monthly payment for the following?

1. A loan of $200,000 for six years

2. A loan of $450,000 for twelve years

3. 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.

Grading Rubric

Please refer to the rubric on the next page for the grading criteria for this assignment.

CATEGORYExemplarySatisfactoryUnsatisfactoryUnacceptable

20 points 15 points 10 points 5 points

Student correctly calculates

the anticipated cash flow per

month and in total for the

quarter.

Student correctly calculates

the anticipated cash flow for

three of the following: each

month and in total for the

quarter.

Student correctly calculates

the anticipated cash flow

for two of the following:

each month and in total for

the quarter.

Student correctly

calculates the anticipated

cash flow for one of the

following: each month and

in total for the quarter.

20 points 15 points 10 points 5 points

Student correctly calculates

all of the following: the APR

and three monthly

payments.

Student correctly calculates

three of the following: the

APR and three monthly

payment amounts.

Student correctly calculates

two of the following: the

APR and three monthly

payment amounts.

Student correctly

calculates one of the

following: the APR and

three monthly payment

amounts.

10 points 8 points 5 points 2 points

Student accurately

determines the net proceeds

of the bond and the cost of

the bonds for the company in

terms of yield.

Student accurately

determines either the net

proceeds of the bond or the

cost of the bonds for the

company in terms of yield.

Student somewhat

accurately determines the

net proceeds of the bond

and the cost of the bonds

for the company in terms of

yield.

Student somewhat

accurately determines

either the net proceeds of

the bond or the cost of the

bonds for the company in

terms of yield.

10 points 8 points 5 points 2 points

Student accurately

determines the net proceeds

of the bond and the cost of

the bonds for the company in

terms of yield.

Student accurately

determines either the net

proceeds of the bond or the

cost of the bonds for the

company in terms of yield.

Student somewhat

accurately determines the

net proceeds of the bond

and the cost of the bonds

for the company in terms of

yield.

Student somewhat

accurately determines

either the net proceeds of

the bond or the cost of the

bonds for the company in

terms of yield.

10 points 8 points 5 points 2 points

Student accurately

determines the net proceeds

of the bond and the cost of

the bonds for the company in

terms of yield.

Student accurately

determines either the net

proceeds of the bond or the

cost of the bonds for the

company in terms of yield.

Student somewhat

accurately determines the

net proceeds of the bond

and the cost of the bonds

for the company in terms of

yield.

Student somewhat

accurately determines

either the net proceeds of

the bond or the cost of the

bonds for the company in

terms of yield.

10 points 8 points 5 points 2 points

Student accurately

determines the net proceeds

of the bond and the cost of

the bonds for the company in

terms of yield.

Student accurately

determines either the net

proceeds of the bond or the

cost of the bonds for the

company in terms of yield.

Student somewhat

accurately determines the

net proceeds of the bond

and the cost of the bonds

for the company in terms of

yield.

Student somewhat

accurately determines

either the net proceeds of

the bond or the cost of the

bonds for the company in

terms of yield.

10 points 8 points 5 points 2 points

Student makes no errors in

grammar or spelling that

distract the reader from the

content.

Student makes 1-2 errors in

grammar or spelling that

distract the reader from the

content.

Student makes 3-4 errors in

grammar or spelling that

distract the reader from the

content.

Student makes more than

4 errors in grammar or

spelling that distract the

reader from the content.

10 points 8 points 5 points 2 points

The paper is written in

proper format. All sources

used for quotes and facts are

credible and cited correctly.

The paper is written in

proper format with only 1-2

errors. All sources used for

quotes and facts are credible

and most are cited correctly.

The paper is written in

proper format with only 3-5

errors. Most sources used

for quotes and facts are

credible and cited correctly.

The paper is not written in

proper format. Many

sources used for quotes

and facts are less than

credible (suspect) and/or

are not cited correctly.

Part C2:Selling

Bonds - Invisible

Rays (10 points)

Part C3: Selling

Bonds - Solar

Glasses (10 points)

Format (10 Points)

Part A: Cash Flow of

A/R (20 points)

Mechanics (10

Points)

Part B: Straight Bank

Loan (20 points)

Part C4: Selling

Bonds -Space Ships

(10 points)

Part C1: Selling

Bonds - Gravity

Belts (10 points)

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