Typically, Delta, Inc. maintains $1 million in cash and marketable securities. - 4590

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Request Description

Typically, Delta, Inc. maintains $1 million in cash and marketable securities. The firm currently is expecting an economic recession and projects that its net cash flows from operations during the period will be $2.5 million. Delta expects annual interest and sinking fund payments will be $3 million during the period. If the recession occurs, Delta’s cash balance at the end of the period will be:

a.$6.5 million.

b.$1 million.

c.$500,000.

d.$3.5 million.

A sinking fund is a fund setup in order to liquidate a liability. The company already has $3.5million and has to make payments of $3million. 

 
Solution Description

Typically, Delta, Inc. maintains $1 million in cash and marketable securities. The firm currently is expecting an economic recession and projects that its net cash flows from operations during the period will be $2.5 million. Delta expects annual interest and sinking fund paymen