QUESTION 1(i) Eli Lilly is very excited because sales for his nursery and plant company areexpected to double from $600,000 to $1,200,000 next year. Eli notes that net assets(Assets — Liabilities) will remain at 50 percent of sales. His firm will enjoy an 8percent return on total sales. He will start the year with $120,000 in the bank and isbragging about the Jaguar and luxury townhouse he will buy. Does his optimisticoutlook for his cash position appear to be correct? Compute his likely cash balanceor deficit for the end of the year. Start with beginning cash and subtract the assetbuildup (equal to 50 percent of the sales increase) and add in profit.(ii) In problem 1 if there had been no increase in sales and all other facts were the same,what would Eli’s ending cash balance be? What lesson do the examples in problems1 and 2 illustrate?QUESTION 2Argue why are Treasury bills a favorite place for financial managers to invest excesscash, as compared to other options? Your answer must be supported with examples andacademic citations.QUESTION 3Discuss the relationship between bond prices and interest rates. What impact do changinginterest rates have on the price of long-term bonds versus short-term bonds? Your answermust be supported with examples and academic citations.QUESTION 4Why are institutional investors important in today’s business world? Your answer must besupported with examples and academic citations.
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