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an inventory turnove
The company is now adopting a new inventory system. If the new system
is able to reduce the firm's inventory level and increase the firm's inventory turnover
ratio to 6 while maintaining the same level of sales and COGS, how much cash will be freed up?
Do not round intermediate calculations. Round your answer to the nearest dollar.
So, we need the cash freed,. The way to do it is to calculate the difference of average inventory before and after new
So, when initially turn over ratio was 4, cogs is given to be 24 million
Similarly under new inventory model,ratio is 6 but cogs remain same( given in question)
Thus, cash freed up is the difference, which is 6 million - 4 million, which is 2million
$2,000,000
2 Medwig Corporation has a DSO of 38 days. The company averages $8,750 in sales each day (all customers take cre
What is the company's average accounts receivable? Round your answer to the nearest dollar.
38 *8750 = $ 332,500.00
3 A large retailer obtains merchandise under the credit terms of 1/20, net 45, but routinely takes 65 days to pay its
(Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.)
What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations
Do not round intermediate calculations. Round your answer to two decimal places.
If this looks confusing or scary, get in touch on chat, I ll break down the steps
Computation of Effective Cost of Trade Credit:
Effective Cost of Trade Credit= [(1+(Disc.%/100%-Disc.%)) ^ (365) / (Days Credit Outstand–Discount Period))] - 1
4 A chain of appliance stores, APP Corporation, purchases inventory with a net price of $200,000 each day.
The company purchases the inventory under the credit terms of 1/15, net 30. APP always takes the discount, but
What is the average accounts payable for APP? Round your answer to the nearest dollar
Now this might look complex, but only pay attention to what you need to calculate, it is APP, means Average accoun
Now, this has a formula, just use that and you are good to go:
200000*15 ( we got 15 from 1/15, whatever number is there in 1/n is your days of discount period
$ 3,000,000.00
5 At today's spot exchange rates 1 U.S. dollar can be exchanged for 10 Mexican pesos or for 111.66 Japanese yen.
You have pesos that you would like to exchange for yen. What is the cross rate between the yen and the peso;
that is, how many yen would you receive for every peso exchanged? Round your answer to two decimal places.
i.e. Yen/Peso = (Yen/Dollar)*(Dollar/Peso) (again, do let me know if you don’t get this part, we can break
(111.66)*(1/10) = 11.166
Yen 11.17/Peso
Hence, Yen received for every Peso = Yen 11.17
6 The nominal yield on 6-month T-bills is 8%, while default-free Japanese bonds that mature in 6 months have a nom
In the spot exchange market, 1 yen equals $0.007. If interest rate parity holds, what is the 6-month forward excha
Round the answer to five decimal places. Do not round intermediate calculations.
Interest rate parity holds that investors should earn the same return on interest-bearing investments in all countries
It recognizes that when you invest in a country other than your home country, you are affected by two forces- retur
It follows that your overall return will be higher than the investment's stated return if the currency in which your inv
The relationship between spot and forward exchange rates and interest rates, which is known as interest rate parity,
rf is calculated as
rf = 5.5%/2
= 2.75% (Because 180days is one-half of 360-day year)
rh = 8% / 2
4% (Because 180 days is one-half of 360-day year)
7 A computer costs $560 in the United States. The same model costs 650 euros in France.
If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar? Do not round i
Round your answer to two decimal places.
Given,
Where,
SpotRate: 560/650
SpotRate 0.86
8 If euros sell for $1.60 (U.S.) per euro, what should dollars sell for in euros per dollar? Round your answer to two d
1 euro= 1.60 $
0.625
be freed up?