Author Question: Brett's, Inc has received a proposal from its bank to establish a lock-box system to accelerate the ... (Read 57 times)

Wadzanai

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Brett's, Inc has received a proposal from its bank to establish a lock-box system to accelerate the receipt of 600
  million annually on 900,000 checks. By its own analysis, Brett's, Inc believes such a system would decrease total
  float by 3.5 days.
 
  If Brett's, Inc can earn 7 percent before taxes on the released funds, what is the maximum that
  Brett's, Inc should be willing to pay the bank per check for the service? Use a 365-day year.

Question 2

Kelly owns 10,000 shares in McCormick Spices, which currently has 500,000 shares outstanding. The stock sells
  for 86 on the open market. McCormick's management has decided on a two-for-one split.
 
  a. Will Kelly's financial position change after the split, assuming that the stock's price will fall
  proportionately?
  Trevor Corporation - Stock Split
  Market price 86.00
  Split multiple 2
  Shares outstanding 500,000
  b. Assuming only a 35 decrease in the stock price, what will be Kelly's value after the split?


LegendaryAnswers

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Answer to Question 1

P = (3.

Answer to Question 2

a.
Investor's shares = 10,000
Position before split 860,000 = 10,000 shares  86 per share
Price after split 43.00 = 86/2
Your shares after split 20,000 = 10,000  2
Position after split 860,000 = 20,000 shares  43 per share
Net gain 0
b.
Price fall 0.35
Price after split 55.90 = 86.00(1-.35)
Position after split 1,118,000 = 20,000 shares  55.90 per share
Net gain 258,000 = 1,118,000-860,000



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