Reference no: EM133080190

Questions -

Q1. Project X requires an initial investment of $35,000 but is expected to generate revenues of $10,000, $27,000 and $19,000 for the first, second, and third years, respectively. The target rate of return is 12%. Since the cash inflows are uneven, the NPV formula is broken out by individual cash flows.

Project Y also requires a $35,000 initial investment and will generate $27,000 per year for two years. The target rate remains 12%. Because each period produces equal revenues, the first formula above can be used.

Q2. ABC Inc. has an inventory conversion period of 80 days, receivables collection period of 20 days, and payables deferral period of 25 days.

a. Calculate the company's cash conversion cycle.

b. If the company has annual sales of $5million, all of them on credit, what is the level of company's accounts receivable?

Q3. Haber dash Inc. last year reported sales of 12 million and an inventory turnover ratio of 3. The company is now adopting a just-in-time inventory system.

If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7.5, while maintaining the same levels of sales, how much cash will be freed up.