Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 17, Problem 12CTCR
Float. An unfortunately common practice goes like this: (Warning: Don’t try this at home.) Suppose you are out of money in your checking account; however, your local grocery store will, as a convenience to you as a customer, cash a check for you. So you cash a check for $200. Of course, this check will bounce unless you do something. To prevent this, you go to the grocery the next day and cash another check for $200. You take this $200 and deposit it. You repeat this process every day, and, in doing so, you make sure that no checks bounce. Eventually, manna from heaven arrives (perhaps in the form of money from home) and you are able to cover your outstanding checks.
To make it interesting, suppose you are absolutely certain that no checks will bounce along the way. Assuming this is true, and ignoring any question of legality (what we have described is probably illegal check kiting), is there anything unethical about this? If you say yes, then why? In particular, who is harmed?
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Students have asked these similar questions
Let’s say you don’t borrow money to buy a car, and instead you write a check for the car. When the car dealership deposits your check, the float created means that the amount in the banking system:Select an answer from the options below.
A
is counted once until the check clearsB
causes the car to be paid for twiceC
causes the car to be sold and then repossessedD
is briefly counted twice until the check clears
Credit Card Fraud and Identity Theft
Loss of a credit card, the information on it, or your personal information can cause serious
problems. For example, you could be required to pay for purchases you didn't make, or you could
spend years repairing the damage to your credit rating.
Consider the following two alternative behaviors.
Behavior
A If I receive an e-mail with a sales offer I like, rather than
provide my account number through the e-mail link, I open
a separate browser window and directly access the
company's website to make my purchase.
B
I save all my charge receipts and reconcile them to my
monthly statement, most often by accessing my account
online.
Which behavior is likely to reduce your chance of experiencing credit card fraud or identity theft?
O Alternative A
O Alternative B
Both Alternatives A and B
ONeither Alternative A nor B
Your friend, Gerald, has asked you to help him with his bank statement. He is sure there are some errors and some things just do not make sense to him. Study the bank statement shown below and answer the questions that follow.
• The fee for deposits is R2,00 plus R1,00 for every R100,00.
• Stop order payments cost R2,50 regardless of the amount.
• Card purchases cost R1,00 regardless of the amount
• Gerald's biggest expense is his accommodation, he pays rent to S. Yusuf.
Questions
3.4
Use the information regarding the banking fee to find a mistake in the fee column. Identify the mistake and correct it.
3.5
How much rent does Gerald pay each month?
3.6
The tax of R2 440 has already been deducted from Gerald’s salary. What tax rate (percentage of his total salary) is he paying towards tax? Round off your answer to two decimal values.
Chapter 17 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 17.1 - Prob. 17.1ACQCh. 17.1 - Prob. 17.1BCQCh. 17.1 - Prob. 17.1CCQCh. 17.1 - Prob. 17.1DCQCh. 17.2 - Prob. 17.2ACQCh. 17.2 - Prob. 17.2BCQCh. 17.2 - Prob. 17.2CCQCh. 17.2 - Prob. 17.2DCQCh. 17.3 - Prob. 17.3ACQCh. 17.3 - Prob. 17.3BCQ
Ch. 17.3 - Prob. 17.3CCQCh. 17.4 - Prob. 17.4ACQCh. 17.4 - Prob. 17.4BCQCh. 17.4 - Prob. 17.4CCQCh. 17.5 - Prob. 17.5ACQCh. 17.5 - Prob. 17.5BCQCh. 17 - If a firm receives a check for 50,000, its...Ch. 17 - Prob. 17.2CCh. 17 - Prob. 17.3CCh. 17 - What are shortage costs?Ch. 17 - Prob. 17.5CCh. 17 - Prob. 1CTCRCh. 17 - Cash Management. What options are available to a...Ch. 17 - LO1 17.3Agency Issues. Are stockholders and...Ch. 17 - Prob. 4CTCRCh. 17 - Short-Term Investments. Why is a preferred stock...Ch. 17 - Prob. 6CTCRCh. 17 - Float. Suppose a firm has a book balance of 2...Ch. 17 - Prob. 8CTCRCh. 17 - Agency Issues. It is sometimes argued that excess...Ch. 17 - Use of Excess Cash. One option a firm usually has...Ch. 17 - Use of Excess Cash. Another option usually...Ch. 17 - Float. An unfortunately common practice goes like...Ch. 17 - Credit Instruments. Describe each of the...Ch. 17 - Trade Credit Forms. In what form is trade credit...Ch. 17 - Receivables Costs. What are the costs associated...Ch. 17 - Prob. 16CTCRCh. 17 - Credit Period Length. What are some of the factors...Ch. 17 - Credit Period Length. In each of the following...Ch. 17 - Prob. 19CTCRCh. 17 - Prob. 20CTCRCh. 17 - Calculating Float. You have 95,000 on deposit with...Ch. 17 - Prob. 2QPCh. 17 - Calculating Float. You have 26,500 on deposit with...Ch. 17 - Prob. 4QPCh. 17 - Prob. 5QPCh. 17 - Calculating Net Float. Each business day, on...Ch. 17 - Size of Accounts Receivable. Essence of Skunk...Ch. 17 - Prob. 8QPCh. 17 - Prob. 9QPCh. 17 - Size of Accounts Receivable. Two Doors Down, Inc.,...Ch. 17 - Prob. 11QPCh. 17 - Prob. 12QPCh. 17 - Prob. 13QPCh. 17 - Prob. 14QPCh. 17 - Prob. 15QPCh. 17 - Safety Stocks and Order Points. Sach, Inc.,...
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