The treasurer for Chic Man Clothing must decide how much money the company needs to borrow in July. The
balance sheet for June 30, 2010 is presented below:
Chic Man Clothing Balance Sheet
June 30, 2010
Cash 87,000 Accounts payable 550,000
Marketable securities 123,000 Long-term debt 350,000
Accounts receivable 360,000 Common stock 130,000
Inventory 300,000 Retained earnings 270,000
Total current assets 870,000 Total liabilities and
stockholders' equity
1,300,000
Fixed assets 430,000
Total assets 1,300,000
The company expects sales of 400,000 for July. The company has observed that 25 of its sales is for cash and
that the remaining 75 is collected in the following month. The company plans to purchase 345,000 of new
clothing. Usually 70 of purchases is for cash and the remaining 30 of purchases is paid in the following
month. Salaries are 135,000 per month, lease payments are 35,000 per month, and depreciation charges are
20,000 per month. The company plans to purchase a new van for 60,000 in July and sell its marketable
securities for 123,000. If the company must maintain a minimum cash balance of 25,000, how much money
must the company borrow in July?
Question 2
You expect to receive 800 at the end of each of the next twenty years. What is the present value of the stream of payments if the interest rate is 6?
A) 9,175.94
B) 9,411.26
C) 9,305.38
D) 9,687.79
E) 9,550.30
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