Reference no: EM132769447

Questions -

Q1) Banana's net purchases amount to 750,000 per year. It buys on terms of 3/10, net 40. It does not take discounts, and it typically pays 60 days after the invoice date. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

Q2) Papaya borrows fund from the Lemon bank. The rate is prime plus 2 percent. The prime rate was 8 percent at the beginning of the loan and changed to 10.5 percent after three months. This was the only change. If Orange borrowed 200,000 for seven months from the bank, how much interest must Papaya pay?

Q3) Grapes holds a safety stock equal to a 30-day supply of chips. It expects to order 340,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. The purchase price per chip is P40; Fixed ordering costs are P200 per order; and the firm's inventory carrying costs is equal to 20 percent of the purchase price. (Assume a 360-day year.) 1. Given the safety stock equal to a 30-day supply of chips, what is its average inventory level? 2. Given the safety stock equal to a 30-day supply of chips, what is Grapes 's minimum cost of ordering and carrying inventory? Give two answers, and are labeled as 1 and 2.

Q4) Alatiris has a cash conversion cycle of 70 days. Annual outlays are 13 million and the cost of negotiated financing is 13 percent, 360 days a year. If the firm increases its average age of inventory by 10 days and reduces its average age of receivable by 12 days, the annual savings is _________.

Q5) Apple has directly placed an issue of commercial paper that has a maturity of 60 days. The issue sold for 875,000 and has an annual interest rate of 10 percent. The value of the commercial paper at maturity is?

Q6) Orange purchased a new machine on November 20th, 2003 for 2,000,000 on credit. The supplier has offered terms of 3/15, net 50. The current interest rate the bank is offering is 18 percent. Should the firm take or give up the cash discount, why?

Q7) Duhat is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 20 percent from 400 canoes per year. The average collection period is expected to increase to 50 days from 30 days, 360 days in a year, and bad debts are expected to double the current 1 percent level. The price per canoe is P950, the variable cost per canoe is P600 and the average cost per unit at the 300 unit level is P800. The firm's required return on investment is 15 percent. What is the net result of implementing the proposed plan?.

Q8) Dragonfruit's business is booming, and it needs to raise more capital. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 50 days without adverse effects. The company purchases supplies on terms of 3/15 net 30, and it currently takes the discount. What would be the effective annual percentage cost of funds raised by this action? (Assume a 360-day year.).

Q9) Pineapple uses 900 units of a product per year on a continuous basis. The product has carrying costs of P70 per unit per year and order costs of P400 per order. It takes 40 days to receive a shipment after an order is placed and the firm requires a safety stock of 6 days usage in inventory. What is the reorder point?

Q10) Banana's net purchases amount to 750,000 per year. It buys on terms of 3/10, net 40. It does not take discounts, and it typically pays 60 days after the invoice date. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

Q11) Papaya borrows fund from the Lemon bank. The rate is prime plus 2 percent. The prime rate was 8 percent at the beginning of the loan and changed to 10.5 percent after three months. This was the only change. If Orange borrowed 200,000 for seven months from the bank, how much interest must Papaya pay?

Q12) Grapes holds a safety stock equal to a 30-day supply of chips. It expects to order 340,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. The purchase price per chip is P40; Fixed ordering costs are P200 per order; and the firm's inventory carrying costs is equal to 20 percent of the purchase price. (Assume a 360-day year.) 1. Given the safety stock equal to a 30-day supply of chips, what is its average inventory level? 2. Given the safety stock equal to a 30-day supply of chips, what is Grapes 's minimum cost of ordering and carrying inventory? Give two answers, and are labeled as 1 and 2.

Q13) Alatiris has a cash conversion cycle of 70 days. Annual outlays are 13 million and the cost of negotiated financing is 13 percent, 360 days a year. If the firm increases its average age of inventory by 10 days and reduces its average age of receivable by 12 days, the annual savings is _________.

Q14) Apple has directly placed an issue of commercial paper that has a maturity of 60 days. The issue sold for 875,000 and has an annual interest rate of 10 percent. The value of the commercial paper at maturity is?

Q15) Orange purchased a new machine on November 20th, 2003 for 2,000,000 on credit. The supplier has offered terms of 3/15, net 50. The current interest rate the bank is offering is 18 percent. Should the firm take or give up the cash discount, why?

Q16) Duhat is considering relaxing its credit standards to encourage more sales. As a result, sales are expected to increase 20 percent from 400 canoes per year. The average collection period is expected to increase to 50 days from 30 days, 360 days in a year, and bad debts are expected to double the current 1 percent level. The price per canoe is P950, the variable cost per canoe is P600 and the average cost per unit at the 300 unit level is P800. The firm's required return on investment is 15 percent. What is the net result of implementing the proposed plan?.

Q17) Dragonfruit's business is booming, and it needs to raise more capital. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 50 days without adverse effects. The company purchases supplies on terms of 3/15 net 30, and it currently takes the discount. What would be the effective annual percentage cost of funds raised by this action? (Assume a 360-day year.).

Q18) Pineapple uses 900 units of a product per year on a continuous basis. The product has carrying costs of P70 per unit per year and order costs of P400 per order. It takes 40 days to receive a shipment after an order is placed and the firm requires a safety stock of 6 days usage in inventory. What is the reorder point?