Assignment _10

Assignment _10 - Chapter 22 HW 22-1. Sales of $10M;...

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Chapter 22 HW 22-1. Sales of $10M; Inventory Turnover Ratio of 2 Increase Ratio to 5 while sales stay the same. How much cash must be freed up? Inventory = 10,000,000/ 2 = $5M Inventory= 10/5 = $2M 5-2=3M freed up due to the 3M reduction in inventory 22-4. Periodic rate = 0.01/0.99 = 1.01%. Periods/year = 365/(60 – 15) = 8.11 EAR = (1 + Periodic rate) n – 1.0 = (1.0101) 8.11 – 1.0 =.0849 =8.49% 22-6. a. DSO =.4(10)+.6*(40) = 28 days b. DSO= Receivables/(Sales/365) 28= Receivables/(912,500/365) = $70,000 c. DSO now equals 4+18 =22 days 22= Receivables/(912,500/365) = $55,000 22-7. Nominal Rate =Discount/(1-Discount Rate) x 365/(Days taken – Discount Period) a. (1/.99)*365/(20-15)=73.74% b. (2/.98)*365/(60-10)=14.90% c. (3/.97)*365/(45-10)=32.25% d. (2/.98)*365/(45-10)=21.28% e. (2/.98)*365/(40-15)=29.80% 22-11. a. CCC = Inventory Conversion Period+ Receivables Collections Periods – Payable Deferral Period =75+38-30 =83 days
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b. Annual Sales/365*DSO = 3,421,875/365*38 =$356,250 c. 365/75=4.87x per year
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Assignment _10 - Chapter 22 HW 22-1. Sales of $10M;...

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