Reference no: EM132969012

Questions -

Q1. Homer Boats has accounts payable days of 20, inventory days of 50, and accounts receivable days of 30. What is its operating cycle?

Q2. Westerly Industries has the following financial information. What is its cash conversion cycle?

Q3. Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will require an initial investment of $2 million in net working capital today. The plant will last 10 years, at which point the full investment in net working capital will be recovered. Given an annual discount rate of 6%, what is the net present value of this working capital investment?

Q4. The Greek Connection had sales of $32 million in 2013, and a cost of goods sold of $20 million. A simplified balance sheet for the firm appears below:

a. Calculate the Greek Connection's net working capital in 2013.

b. Calculate the cash conversion cycle of The Greek Connection in 2013.

c. The industry average accounts receivable days is 30 days. What would have been the cash conversion cycle for The Greek Connection in 2013 had it matched the industry average for accounts receivable days?

Q5. Assume the credit terms offered to your firm by your suppliers are 3/5, net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30.

Q6. Your supplier offers terms of 1/10, net 45. What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day 45?

Q7. Your firm purchases goods from its supplier on terms of 3/15, net 40.

a. What is the effective annual cost to your firm if it chooses not to take the discount and makes its payment on day 40?

b. What is the effective annual cost to your firm if it chooses not to take the discount and makes its payment on day 50?