When a firm uses a lockbox plan, their checks are deposited into a local bank an

Question

When a firm uses a lockbox plan, their checks are deposited into a local bank and immediately invested in short-term investments. Calculate the WACC for Martin Industries given: A tax rate of 34%, the market return is 13.2% and the risk-free rate is 4.5%. 7.500 preferred stock shares selling at $88/share with a 6% dividend rate. 265,000 common shares outstanding selling for $76/share. The stock has a beta of 0.92 and will pay a dividend of $2.48 next year. The dividend is expected to grow by 4% per year indefinitely. 8.500 coupon bonds outstanding with a 7.1% coupon rate and 14 years to maturity. The quoted price is 102.6. Interest is paid semiannually. Which of the following are uses of cash? increasing accounts receivable decreasing inventory increasing debt decreasing accounts payable

Explanation / Answer

8.False. Funds re not invested in short term investments. they are credited to company account

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