Current Asset Management Solutions 14

Current Asset Management Solutions 14 - EBT 166.00 241.60...

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Old Exam Questions - Current Asset Management - Solutions Page 14 of 21 Pages New Sales = $4,320 - $3,600 = $720 New Sales Per Day = $720 / 360 = $2 per day Incremental Investment in Receivables : Old Sales = ($10)(60 - 30) = $300 New Sales = ($2)(60)(.80) = $96 Total Investment = $300 + $96 = $396 New Interest = ($396)(.10) = $39.60 New Bad Debt Expense = ($4,320 - $3,600)(.04) = $28.80 Change in Net Income = $144.96 - $99.60 = $45.36 Income Statement Year 0 Year 1 Sales 3,600.00 4,320.00 Variable Costs -2,880.00 -3,456.00 Gross Profit 720.00 864.00 Fixed Costs - 400.00 - 400.00 Bad Debt Expense: Original - 54.00 - 54.00 New --- - 28.80 EBIT 266.00 381.20 Interest: Original - 100.00 - 100.00 New --- - 39.60
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Unformatted text preview: EBT 166.00 241.60 Taxes (40%) - 66.40- 96.64 Net Income 99.60 144.96 17. A company believes that it will need to order 300,000 units of inventory over the coming year. The current price per unit of inventory is $4 per unit. Fixed ordering charges for inventory are $150 per order and carrying costs for inventory are equal to 10 percent of the average value (price) of the inventory carried. As you can calculate, the optimal order quantity is: Q* = [(2)($150)(300,000) / (.10)($4)] 1/2 = 15,000 units And the firm will place 20 orders per year. Assume that the firm has the option of taking a 10 percent discount (price of $3.60 per unit) if it orders 25,000 units per order...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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