Assignment 08 BU440 Financial Management II

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, 5% pay at the end of the fourth month, 5% default on their bills. Myers wants to know the anticipated cash flow fro the first quarter of 2009 if the past billings  follow this same pattern. The actual and anticipated billings are as follows.

Fourth Quarter Actual Billings: Oct. $392,000, Nov. $323,000, Dec. $296,000

First Quarter Anticipated Billings: Jan. $340,000, Feb. $360,000, Mar. $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 for $450,000 for twelve years 3. A loan for $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 Chips       12.0%               4%of sale price        0%                   20 years