Calculate the operating and cash cycle for XYZ Company

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Questions -

Question 1 - Consider the following pair of bonds which are alike except for the characteristics listed.

Bond A: 6% (coupon rate), Not callable

Bond B: 5% (coupon rate), callable

Discuss which bond should have the higher yield to maturity.

Question 2 - The following financial information relates to XYZ Company:

Inventory turnover: 5 times

Accounts receivable turnover = 6 times

Accounts payable turnover = 4 times

XYZ gives its customers a credit period of 60 days.

XYZ's suppliers offer a credit period of 90 days.

For simplicity, we assume that the year consists of 360 days.

(i) Calculate the operating and cash cycle for XYZ Company.

(ii) Evaluate the implications of the cash cycle for XYZ's working capital management.

Question 3 - You are offered the choice of two annuities.

A: Receive $100 every year for the next ten years. The first payment starts one year from today.

B: Receive $204 every two years for the next ten years. The first payment starts two years from today.

Without calculating the present values of the annuities, explain how you can obtain the rate of interest per annum that would make you indifferent between the two annuities.

Reference no: EM132747053

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