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12) Initiating a cash discount Gardner company currently makes all sales
on credit and offers no cash discount. The firm is considering offering a
3% cash discount for payment within 15 days. The firm’s current
average collection period is 60 days, sales are 40,000 units, selling price
is $46 per unit, and visible cost per unit is $30. The firm expects that the
change in credit terms will result in an increase in sales.
13) Degree of financial leverage North western Savings and Loan has a
current capital structure consisting of $230,000 of 15% (annual interest)
debt and 1,000 shares of common stock. The firm pays taxes at the rate
of 30%.
14) Various Capital Structures Character Enterprises currently has $1.5
million in total assets and is totally equity financed. It is contemplating a
change in its capital structure. Compute the amount of debt and equity
that would be outstanding is the firm were to shift to each of the
following debt ratios: 10%, 20%, 30%, 40%, 50%, 60%, and 90%.
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FIN 419 Final Exam Guide

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True/False (1point each)
1. The sole proprietor has unlimited liability; his or her total investment
in the business, but not his or her personal assets, can be taken to satisfy
creditors.