Determine by how much would pre-tax profits change

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Primrose Corp has $13 million of sales, $3 million of inventories, $2 million of receivables, and $3 million of payables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 8% rate. Assume 365 days in year for your calculations. Do not round intermediate steps.

What is Primrose's cash conversion cycle (CCC)?

If Primrose could lower its inventories and receivables by 11% each and increase its payables by 11%, all without affecting sales or cost of goods sold, what would be the new CCC?

How much cash would be freed-up?

By how much would pre-tax profits change?

Reference no: EM13335688

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