Reference no: EM13927833
1) Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35 days, and a payable deferral of 25 days. Assume that cost of goods sold is 80% of sales.
a) What is the length of the firm's cash conversion cycle?
b) If Negus's annual sales are $4,380,000 and all sales are on fredit, what is the firm's investment in accounts receivable?
c) How many times per year does Negus Enterprises turn over its inventory?
2) Strickler Tecnology is considering changes in its working capital policies to improve its cash flow. Strickler's sales last year were $3,250,000 (all in credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. It's annual cost of goods sold was $1,800,000. The firm had fix assets totaling $535,000. Strickler's payables deferral period is 45 days
a) Calculate Strickler's cash conversion cycle.
b) Assuming Strickler holds neglegible amounts of cash and marketable securities, calculate its total assets turnover and ROA
c) Suppose Strickler's managers believe the annual inventory turnover can be raised to 9 times without affecting sales. What would Strickler's cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the year?
|
Exercise on bond valuation
: An investor has two bonds in her portfolio that have a face value of $1000 and pay a 10% annual coupon. Bond A matures in 15 years, while Bond B matures in 1 year. Why does the longer-term bond price vary more than the price of the shorter-term bon..
|
|
The two principal agencies that regulate the export of goods
: The two principal agencies that regulate the export of goods from the U.S. are:
|
|
The current spot exchange rate
: The current spot exchange rate is $1.25 = €1.00 and the three-month forward rate is $1.30 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.20 = €1.00. If we decided to exercise this option immediately, what re..
|
|
Evaluating two different silicon wafer milling machines
: You are evaluating two different silicon wafer milling machines. The Techron I costs $237,000, has a three-year life, and has pretax operating costs of $62,000 per year. The Techron II costs $415,000, has a five-year life, and has pretax operating co..
|
|
What is the length of the firms cash conversion cycle
: Negus Enterprises has an inventory conversion period of 50 days, an average collection period of 35 days, and a payable deferral of 25 days. Assume that cost of goods sold is 80% of sales. What is the length of the firm's cash conversion cycle? Calcu..
|
|
Target capital structure-cost of common equity
: Percy Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company’s outstanding bonds is 9%, and its tax rate is 40%. Percy’s CFO estimates that the company’s WACC is 9.96%. W..
|
|
Interest rate parity
: Six-month T-bills have a nominal rate of 6%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 3%. In the spot exchange market, 1 yen equals $0.008. If interest rate parity holds, what is the 6-month forward exchange ra..
|
|
What is the price of put option with the same exercise price
: A call option is currently selling for $4.70. It has a strike price of $115 and four months to maturity. The current stock price is $117, and the risk-free rate is 3 percent. The stock will pay a dividend of $2.15 in two months. What is the price of ..
|
|
Product to two groups of consumers in different parts
: You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1’s elasticity of demand is -2, while group 2’s is -3. Your marginal cost of producing the product is $30. Determine your optim..
|