A corporation has $344 million in sales,$232 million in COGS, $53 million in inventory, $128 million in accounts receivables, and $93 million in accounts payable. The firm borrows at 8% compounded daily to finance its NOWC. How much will the firm have to pay in interest for the year due to the Cash Conversion Cycle? Hint: take the CoGS and calculate how much it grows over one cash conversion cycle (in days) with a daily interest rate that you calculate from APR. Answer in millions of dollars. Make sure you have 3 or 4 significant digits (ie. if the the answer is $6,789,012 million, your answer should be 6.789)

A corporation has $344 million in sales,$232 million in COGS, $53 million in inventory, $128 million in accounts receivables, and $93 million in accounts payable. The firm borrows at 8% compounded daily to finance its NOWC. How much will the firm have to pay in interest for the year due to the Cash Conversion Cycle? Hint: take the CoGS and calculate how much it grows over one cash conversion cycle (in days) with a daily interest rate that you calculate from APR. Answer in millions of dollars. Make sure you have 3 or 4 significant digits (ie. if the the answer is $6,789,012 million, your answer should be 6.789)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter16: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 11P

See similar textbooks

Similar questions

Parramore Corp has $10 million of sales, $2 million of inventories, $4 million of receivables, and $3 million of payables. Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at a 7% rate. Assume 365 days in year for your calculations. A. What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places. days B. If Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places. days C. How much cash would be freed up, if Parramore could lower its inventories and receivables by 12% each and increase its payables by 12%, all without affecting sales or cost of goods sold? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate…
Parramore Corp has $18 million of sales, $2 million of inventories, $3.5 million of receivables, and $2.5 million of payables. Its cost of goods sold is 80% of sales, and it finances working capital with bank loans at an 8% rate. Assume 365 days in year for your calculations. What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places. days If Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places. days How much cash would be freed up, if Parramore could lower its inventories and receivables by 9% each and increase its payables by 9%, all without affecting sales or cost of goods sold? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate…
C. Exodus Corp. is analyzing the performance of its cash management. On the average, the firm holds inventory 65 days, pays its suppliers in 35 days, and collects its receivables in 15 days. The firm has a current annual outlay of P1,960,000 on operating cycle investments. Exodus currently pays 10 percent for its negotiated financing. (Assume a 360-day year.) Calculate the following: a. Cash conversion cycle b. Operating cycle. c. Daily expenditure and the firm's annual savings if the operating cycle is reduced by 15 days.
1. Makmak Corporation uses the Baumol Cash Management Model to determine its optimal cash balance. For the coming year, the expected cash disbursement total P432,000. The interest rate on marketable securities is 5% and P8 is the cost per transaction. What is the optimal Cash Balance of the company? 2. If Hot Tubs Inc. had annual credit sales of P2,027,773 and its days sales outstanding was equal to 35 days, what was its average A/R outstanding? (Use a 365-day year.)
Rosanna Corp. has P15million of sales; P2million of inventories; P3million of receivables and P1million of payable. Its cost of sales is 80% of sales, and it finance working capital with bank loans at an 8% rate. What is Rosanna’s cash conversion cycle? If Rosanna could lower its inventories and receivables by 10% each, and increase its payable by 10%, all without affecting sales or cost of sales, what would be the new Cash conversion cycle? Following number 2 above, how much cash would be freed up?
Buccaneer, Inc., has determined that it needs $10 million in cash per week. If Buccaneer needs additional cash, it can sell marketable securities, incurring a fee of $100 for each transaction. If Buccaneer leaves funds in its marketable securities, it expects to earn approximately 0.2% per week on their investment. 1. How much is the weekly opportunity cost of cash? (Use a number, must be in decimal form. eg. 6.3%/100, encode 0.063 , no commas, no currency, no space) * 2. How much is the total demand for cash per week? (Use a number, no decimal value, no commas, no currency, no space) *
Watkins Resources faces a smooth annual demand for cash of $1.66 million, incurs transaction costs of $69 every time the firm sells marketable securities, and can earn 3.1 percent on its marketable securities. What will be its optimal cash replenishment level? (Enter your answer in dollars not in millions. Round your answer to 2 decimal places.) Optimal cash
Suppose that LilyMac Photography has annual sales of $230,000, cost of goods sold of $165,000, average inventories of $4,500, average accounts receivable of $25,000, and an average accounts payable balance of $7,000.Assuming that all of LilyMac’s sales are on credit, what will be the firm’s cash cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Suppose that Ken-Z Art Gallery has annual sales of $870,000, cost of goods sold of $560,000, average inventories of $244,500, average accounts receivable of $265,000, and an average accounts payable balance of $79,000. Assuming that all of Ken-Z's sales are on credit, what will be the firm's cash cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
A firm needs a total P30 million in new cash for transaction purposes. The annual interest rate on marketable securities is 12% and the brokerage fee cost per transaction of selling securities to replenish cash is P1,000. Which of the following is closest to the firm’s optimal average cash balance?
The company has sales of $ 10 million per year, all of which are from credit terms that require payment to be made within 30 days, and the company's account receivables amount to $ 2 million. What is the DSO of the company, what is the value if all borrowers pay on time, and how much capital will be released if the company takes actions that lead to timely payment?
Suppose that LilyMac Photography has annual sales of $233,000, cost of goods sold of $168,000, average inventories of $4,800, average accounts receivable of $25,600, and an average accounts payable balance of $7,300. Assuming that all of LilyMac's sales are on credit, what will be the firm's cash cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.) What will be the firm's operating cycle? (Use 365 days a year. Do not round intermediate calculations. Round your final answer to 2 decimal places.)