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King Manufacturing turns its inventory 9.1 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm's annual sales are $72 million, its cost of goods sold represents 50 percent of sales, and its purchases represent 80 percent of cost of goods sold. Assume a 365-day year.
a. Calculate the firm's operating cycle (OC) and cash conversion cycle (CCC).
b. Calculate the firm's total resources invested in its CCC.
c. Assuming that the firm pays 14 percent to finance its resource investment in its CCC, how much would it save annually by reducing its CCC by 20 days if this reduction were achieved by shortening the average age of inventory by 10 days, shortening the average collection period by 5 days, and lengthening the average payment period by 5 days?
d. If the 20-day reduction in the firm's CCC could be achieved by a 20-day change in only one of the three components of the CCC, which one would you recommend? Explain.
Explain the purpose of a credit rating on a corporate debt issue. In your answer, discuss the importance of a credit rating on an international capital markets debt issue from the perspective of both a borrower and an investor.
EMC Corporation has never paid a dividend. Its current free cash flow is $400,000 and is expected to grow at a constant rate of 5 percent. The weighted average cost of capital is WACC _ 12%. Calculate EMC's value of operations.
your client says with the unrealized gains in my portfolio i have almost saved enough money for my daughter to go to
The estimated values of the yearly ATCF (after tax cash flows) of a Project are given in the Table below. The duration of the Project is six years. The initial cost of the Project is $2,800,000. MARR (the minimum attractive rate of return) is 12%.
Next year's dividend is expected to be $0.80, and the appropriate discountrate is 12%. If you have $20,700 to invest, how many shares can you buy in Hambleton Ales?
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Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required return %
Consider another all-equity firm that does not pay taxes due to large tax loss carry-forwards from previous years. The personal tax rate on interest income is 15 percent, and there are no costs of financial distress.
During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $65,000, respectively. Yappy requires a 10% return on all new investments.
if a 1000 zero coupon bond with a 20-year maturity has a market price of 311.80 what is its rate of
What is the price of the bill? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) What is its bond equivalent yield? (Use 365 days a year. Do not round intermediate calculations. Round your answer to..
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